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<A HREF="#bg78101_table_of_contents">  TABLE OF CONTENTS</A> <BR>
<A HREF="#fa78101_index_to_combined_and___fa702231">  INDEX TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS</A><BR></font>
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</FONT> <FONT SIZE=2><B>As filed with the Securities and Exchange Commission on November&nbsp;10, 2011  </B></FONT></P>

<P ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><B> Registration No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </B></FONT></P>

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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=5><B>UNITED STATES<BR>  </B></FONT><FONT SIZE=5><B>SECURITIES AND EXCHANGE COMMISSION<BR>  </B></FONT><FONT SIZE=2><B>Washington, DC 20549  </B></FONT></P>

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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=5><B>FORM S-1<BR>  </B></FONT><FONT SIZE=2><B>REGISTRATION STATEMENT<BR>
UNDER<BR>
THE SECURITIES ACT OF&nbsp;1933  </B></FONT></P>

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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=5><B>Smith Electric Vehicles Corp.<BR>  </B></FONT><FONT SIZE=2>(Exact name of Registrant as specified in its charter) </FONT></P>
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<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>Delaware</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>3711</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>26-4073886</B></FONT></TD>
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<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>(State or other jurisdiction of<BR>
incorporation or organization)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>(Primary Standard Industrial<BR>
Classification Code Number)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>(I.R.S. Employer<BR>
Identification No.)</FONT></TD>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>12200 N.W. Ambassador Drive<BR>
Suite&nbsp;326<BR>
Kansas City, MO 64163<BR>
(816)&nbsp;464-0508<BR>  </B></FONT><FONT SIZE=2>(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) </FONT></P>

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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>Paul&nbsp;R. Geist<BR>
Chief Financial Officer<BR>
Smith Electric Vehicles Corp.<BR>
12200 N.W. Ambassador Drive<BR>
Suite&nbsp;326<BR>
Kansas City, MO 64163<BR>
(816)&nbsp;464-0508<BR>  </B></FONT><FONT SIZE=2>(Name, address, including zip code, and telephone number, including area code, of agent for service) </FONT></P>

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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>Copies to:  </B></FONT></P>
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<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>W. Andrew Jack, Esq.<BR> </B></FONT><FONT SIZE=2>Covington&nbsp;&amp; Burling&nbsp;LLP<BR>
1201 Pennsylvania Avenue, N.W.<BR>
Washington, D.C. 20004<BR>
(202)&nbsp;662-6000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> Justin&nbsp;L. Bastian, Esq.<BR> </B></FONT><FONT SIZE=2>Sandra P. Knox, Esq.<BR>
Faie R. Dorin, Esq.<BR>
Sidley Austin&nbsp;LLP<BR>
1001 Page Mill Road, Building 1<BR>
Palo Alto, CA 94304<BR>
(650)&nbsp;565-7000</FONT></TD>
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 <P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B>Approximate date of commencement of proposed sale to the public:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;As soon as practicable after this
Registration
Statement becomes effective. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule&nbsp;415 under the Securities Act of 1933, check the
following box:&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is filed to register additional securities for an offering pursuant to Rule&nbsp;462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective registration statement for the same offering.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is a post-effective amendment filed pursuant to Rule&nbsp;462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is a post-effective amendment filed pursuant to Rule&nbsp;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.&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule&nbsp;12b-2 of the Exchange Act. (Check one): </FONT></P>
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<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>Large&nbsp;accelerated&nbsp;filer&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2> Accelerated&nbsp;filer&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2> Non-accelerated&nbsp;filer&nbsp;<FONT FACE="WINGDINGS">&#253;</FONT><BR></FONT> <FONT SIZE=1>(Do not check if a smaller<BR>
reporting company)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2> Smaller&nbsp;reporting&nbsp;company&nbsp;<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>Calculation of Registration Fee  </B></FONT></P>
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<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Title of Each Class of<BR>
Securities to be Registered</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Proposed Maximum<BR>
Aggregate<BR>
Offering Price(1)(2)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>Amount of<BR>
Registration Fee(2)</B></FONT><BR></TH>
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<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common Stock, $0.001 par value</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2> $125,000,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2> $14,325</FONT></TD>
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<TD COLSPAN=5 style="font-family:times;border-bottom:double #000000 2.25pt;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"> &nbsp;</TD>
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<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Includes
shares issuable upon exercise of the underwriters' over-allotment option.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Estimated
solely for the purpose of calculating the registration fee pursuant to Rule&nbsp;457(o) under the Securities Act of 1933. </FONT></DD></DL>
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 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>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&nbsp;a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section&nbsp;8(a) of the Securities Act of 1933, or
until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section&nbsp;8(a), may determine.</B></FONT></P>


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<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

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 </B></FONT><FONT COLOR="#FF4040" SIZE=2><B>The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and we are not soliciting an offer to buy
these securities, in any jurisdiction where the offer or sale is not permitted. </B></FONT></P>

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 </B></FONT><FONT COLOR="#FF4040" SIZE=2><B>Subject to Completion dated November&nbsp;10, 2011</B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Preliminary Prospectus  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><B>[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;] Shares  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><B>
<IMG SRC="g787796.jpg" ALT="LOGO" WIDTH="180" HEIGHT="120">
  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><B> Common Stock  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=4><I>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This is the initial public offering of our common stock. No public market currently exists for our common stock. We are
offering&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
of the shares to be sold in the offering. The selling stockholders identified in this prospectus are offering an
additional&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares. We will not receive any of the proceeds from the
sale of the shares being sold by the selling stockholders. We expect the public offering price to be between $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have applied to list our common stock on The Nasdaq Global Market under the symbol "SMTH". </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>Investing in our common stock involves a high degree of risk. Before buying any shares, you should carefully read the discussion of material risks of investing in
our common stock in "Risk Factors" beginning on page&nbsp;16 of this prospectus.  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B>Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.</B></FONT></P>
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<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Per Share </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Public offering price</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Underwriting discounts and commissions</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Proceeds, before expenses, to us</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Proceeds, before expenses, to the selling stockholders</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriters may also purchase from us and the selling stockholders up to an additional&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our
common stock at the public offering price, less the underwriting
discounts and commissions payable by us, to cover over-allotments, if any, within 30&nbsp;days from the date of this prospectus. If the underwriters exercise this option in full, the
total underwriting discounts and commissions will be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, our total proceeds, after underwriting discounts and commissions but before expenses, will be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, and the selling
stockholders' total proceeds before expenses will be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><I>Joint Book Running Managers  </I></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>

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<TD style="font-family:times;"><FONT SIZE=4><B>UBS Investment Bank</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=4>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=4><B>BofA Merrill Lynch</B></FONT></TD>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>Delivery
of the shares will be made on or
about&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should rely only on the information contained in this prospectus. We and the underwriters have not authorized anyone to provide you with information different
from that contained in this prospectus. We and the selling stockholders named in this prospectus are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front cover of this prospectus, or such other dates as are stated in this
prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. </FONT></P>

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NAME="BG78101A_main_toc"></A> </FONT></P>

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<BR></FONT><FONT SIZE=2><B>  TABLE OF CONTENTS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
<A NAME="BG78101_TOC"></A> </FONT></P>
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<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="23pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#bi78101_conventions_that_apply_to_this_prospectus"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Conventions that Apply to this Prospectus</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#bi78101_conventions_that_apply_to_this_prospectus"><FONT SIZE=2>i</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#ca78101_prospectus_summary"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Prospectus Summary</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ca78101_prospectus_summary"><FONT SIZE=2>1</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#da78101_risk_factors"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Risk Factors</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#da78101_risk_factors"><FONT SIZE=2>16</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#dg78101_forward-looking_statements"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Forward-Looking Statements</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dg78101_forward-looking_statements"><FONT SIZE=2>42</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#dg78101_use_of_proceeds"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Use of Proceeds</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dg78101_use_of_proceeds"><FONT SIZE=2>43</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#dg78101_dividend_policy"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Dividend Policy</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dg78101_dividend_policy"><FONT SIZE=2>44</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#di78101_capitalization"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Capitalization</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#di78101_capitalization"><FONT SIZE=2>45</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#di78101_dilution"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Dilution</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#di78101_dilution"><FONT SIZE=2>47</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#dk78101_selected_historical_financial_data"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Selected Historical Financial Data</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dk78101_selected_historical_financial_data"><FONT SIZE=2>49</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#dm78101_management_s_discussion_and_an__man03466"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Management's Discussion and Analysis of Financial Condition and Results of
Operations</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dm78101_management_s_discussion_and_an__man03466"><FONT SIZE=2>52</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#ds78101_business"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Business</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ds78101_business"><FONT SIZE=2>77</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#dy78101_management"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Management</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#dy78101_management"><FONT SIZE=2>107</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#ea78101_executive_compensation"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Executive Compensation</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ea78101_executive_compensation"><FONT SIZE=2>115</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#ee78101_relationships_and_related_person_transactions"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Relationships and Related Person Transactions</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ee78101_relationships_and_related_person_transactions"><FONT SIZE=2>133</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#eg78101_principal_and_selling_stockholders"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Principal and Selling Stockholders</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#eg78101_principal_and_selling_stockholders"><FONT SIZE=2>139</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#eg78101_shares_eligible_for_future_sale"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares Eligible for Future Sale</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#eg78101_shares_eligible_for_future_sale"><FONT SIZE=2>141</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#ei78101_description_of_capital_stock"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Description of Capital Stock</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ei78101_description_of_capital_stock"><FONT SIZE=2>144</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#ek78101_material_u.s._federal_income_t__mat02491"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Material U.S. Federal Income Tax Considerations for Non-U.S.
Holders</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#ek78101_material_u.s._federal_income_t__mat02491"><FONT SIZE=2>151</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#em78101_underwriting"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Underwriting</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#em78101_underwriting"><FONT SIZE=2>155</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#em78101_legal_matters"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Legal Matters</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#em78101_legal_matters"><FONT SIZE=2>163</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#em78101_experts"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Experts</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#em78101_experts"><FONT SIZE=2>163</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#em78101_where_you_can_find_more_information"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Where You Can Find More Information</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#em78101_where_you_can_find_more_information"><FONT SIZE=2>163</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#fa78101_index_to_combined_and___fa702231"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Index to Combined and Consolidated Financial Statements</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#fa78101_index_to_combined_and___fa702231"><FONT SIZE=2>F-1</FONT></A></TD>
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
"Smith Electric Vehicles" design logo, "Smith," "Smith Electric," "Newton," "Edison," "Smith Power," "Smith Drive," and "Smith Link" and other trademarks or service marks of ours
appearing in this prospectus are our property. This prospectus contains additional trade names, trademarks and service marks of other companies. We do not intend our use or display of other companies'
tradenames, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies. </FONT></P>

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<BR></FONT><FONT SIZE=2><B>  CONVENTIONS THAT APPLY TO THIS PROSPECTUS    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless the context otherwise requires, in this prospectus: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>"Smith," "the Company," "we," "us" and "our" refer to Smith Electric Vehicles Corp. and, for the period following
January&nbsp;1, 2011, its subsidiary;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>"Smith Europe" refers to our subsidiary, Smith Electric Vehicles Europe Limited; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>"Smith UK" refers to the zero emission vehicles business of Tanfield Group&nbsp;Plc, which was operated by SEV
Group&nbsp;Ltd. and Saxon Specialist Electric Vehicles, a wholly owned subsidiary and division, respectively, of Tanfield Group&nbsp;Plc. We acquired the Smith UK business effective
January&nbsp;1, 2011. Smith Europe operates the Smith UK business. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
market data presented in this prospectus has been derived from data included in various vehicle industry publications, surveys and forecasts, including those generated by J.D.
Power and Associates. Certain target market sizes presented in this prospectus have been calculated by us (as further described below) based on such data. We have assumed the correctness and
truthfulness of such data, including projections and estimates, when we use them in this prospectus. You should read our cautionary statement in the section entitled "Forward-Looking Statements." </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>i</FONT></P>

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<BR></FONT><FONT SIZE=2><B>  PROSPECTUS SUMMARY    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>This summary highlights information contained elsewhere in this prospectus. To understand this offering fully,
you should read the entire prospectus carefully, including "Risk Factors," "Selected Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and our financial statements and related notes before deciding whether to purchase shares of our common stock.</I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OUR COMPANY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We design, produce and sell zero emission commercial electric vehicles designed to be a superior performing alternative to traditional
diesel trucks due to higher efficiency and lower total cost of ownership. We believe we are the only vehicle manufacturer selling to major commercial fleets in the United States and Europe that
exclusively produces electric vehicles. Our vehicle designs leverage over 80&nbsp;years of market knowledge from selling and servicing electric vehicles in
the United Kingdom. This experience has led to the development of our advanced powertrain (Smith Drive&#153;), power management (Smith Power&#153;) and telemetry (Smith
Link&#153;) technologies. We believe that these technologies will drive improved vehicle performance, provide us with increased control over supply chain quality and reduce the upfront cost of
our vehicles. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unlike
companies that have introduced electric passenger vehicles, we focus on the production and sale of commercial electric vehicles that primarily address the needs of
medium-duty commercial fleet operators with depot-based operations and predictable daily service routes of up to 120 miles. We believe we are the only company focused on producing and
globally offering an all-electric commercial vehicle having a gross vehicle weight, or GVW, between approximately 16,500 and 26,400&nbsp;pounds (the Smith Newton&#153;). We also
produce the Smith Edison&#153;, which is a lighter duty vehicle than the Newton that is sold in the United Kingdom and in other selected markets worldwide. As part of our continued focus on
product development, we plan to introduce a Newton model that is configured as a step van in the United States in early 2012. Our vehicles feature a battery system that is scalable to meet the varying
range needs of commercial fleets and provide a lower total cost of ownership than that of a conventional diesel vehicle. We believe electric vehicles are ideally suited for the cost conscious
commercial vehicles market because: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>lower cost per mile</I></FONT><FONT SIZE=2>&#151;on a per mile basis electric power to
charge our vehicles costs significantly less than diesel fuel;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>less volatility</I></FONT><FONT SIZE=2>&#151;the cost of electricity is considerably less
volatile than the price of diesel fuel;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>less maintenance</I></FONT><FONT SIZE=2>&#151;electric vehicles require less maintenance
than diesel vehicles due to the fewer number of moving parts in an electric powertrain than in a diesel powertrain;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>minimal infrastructure requirements</I></FONT><FONT SIZE=2>&#151;most commercial vehicles
in our target market operate from the same location and follow specific routes, eliminating the need for distributed charging infrastructure and concerns over limited range; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>fuel efficient with low environmental impact</I></FONT><FONT SIZE=2>&#151;commercial fleet
operators are under government and popular pressure to improve fuel mileage, cut emissions and reduce noise associated with diesel powered trucks. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Demand
for our vehicles is growing as customers recognize their economic benefits. Additionally, in the near term we believe that governmental and popular support for companies that
purchase environmentally friendly transportation will accelerate demand for our vehicles. Over the twelve months ended September&nbsp;30, 2011, we sold 320 vehicles, and as of October&nbsp;31,
2011 we have an order backlog of 120 vehicles and have allocated nearly all of our estimated 540 production slots through July&nbsp;2012. In addition to the 120 vehicles included in our order
backlog, we have written indications of interest </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>1</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>from
existing and potential customers for approximately 2,220 vehicles for requested delivery spanning the period 2012 through 2015. We are actively involved in discussions with existing and potential
customers on an ongoing basis and expect to continue to allocate additional production slots and increase our order backlog. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
sell our vehicles through our direct sales force, as well as limited third party distribution agreements. We sell our vehicles to commercial fleet operators across multiple
industries, including food&nbsp;&amp; beverage, utility, telecommunications, retail, grocery, parcel and postal delivery, school transportation, military and government. Our customers include the
following: </FONT></P>
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<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Utilities </B></FONT></TH>
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<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Retail </B></FONT></TH>
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<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Grocery </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Package Delivery </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Military </B></FONT></TH>
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 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
sales strategy is focused on industry-leading companies and government entities that operate substantial, well-recognized, medium-duty commercial vehicle
fleets and that have the corporate or public commitment and resources to support and sustain the development of the commercial electric vehicle industry. We offer a differentiated approach to
commercial vehicle sales and service that departs from traditional truck sales and service models. Our approach involves a comprehensive plan for the pilot and roll-out of our electric
vehicles, as well as the ongoing replacement of existing commercial vehicles with our electric vehicles, which is tailored to the individual needs of our customers. This plan includes the development
of a multi-year purchasing forecast to help the customer systematically integrate our vehicles into their fleets, as well as analytics that provide the expected economic and environmental
impact of fleet conversion. We believe that our strategy of targeting industry-leading companies and providing them with an individualized sales and service solution has elevated our public profile,
enhanced the credibility of our vehicles in the marketplace and made our customers advocates of our sales approach and our vehicles, all of which enhances our ability to sell vehicles to new
customers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a part of our sales strategy, we separately present to our customers the base vehicle price and the battery system price. We believe that, in most cases, our base vehicle price is
competitive with or a slight premium to the price of a diesel-fueled vehicle with a comparable GVW. Our approach to pricing allows customers to compare the relative merits of a diesel truck's low cost
energy storage system (the fuel tank) and more expensive and volatile energy cost (the per gallon price of diesel fuel) with our vehicle's higher cost energy storage system (the battery) and lower and
more predictable energy cost (the per kilowatt hour price of electricity). We believe these comparisons make our vehicles more attractive to customers than traditional diesel options, particularly
during periods of rising fuel prices, even when the social and environmental benefits of our vehicles are ignored. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
currently design, produce and sell vehicles based on two platforms, the Smith Newton and the Smith Edison, both of which can be configured for multiple applications. The Newton has a
GVW of approximately 16,500 to 26,400&nbsp;pounds, a payload capacity of approximately 6,100 to 16,200&nbsp;pounds and a range of up to 50 to 150&nbsp;miles depending on vehicle specification
and battery configuration. The Newton, which is sold in the United States and internationally, is used in a wide range of general delivery applications, as well as in specialty applications such as
refrigerated delivery, military transport and boom truck. In November&nbsp;2011, less than 24&nbsp;months after the first sale of the Smith Newton in the United States, we introduced a second
generation Newton, which incorporates our Smith Drive, Smith Power and Smith Link technologies. We also are developing a Newton model that will have a GVW of </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>2</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>approximately
33,000 pounds to meet the needs of delivery and transit customers, which we expect to be available in mid-2012. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Smith Edison, which is a lighter duty vehicle than the Newton, is sold in the United Kingdom and in other selected markets worldwide. The Edison has a GVW of approximately 7,700 to
10,100&nbsp;pounds, a payload capacity of approximately 1,600 to 5,100&nbsp;pounds and a range of up to 55 to 110&nbsp;miles depending on vehicle specification and battery configuration. The
Edison is used in a wide range of service and delivery applications, as well as specialty applications such as refrigerated delivery, utility boom and shuttle service. We intend to continue to develop
and introduce a next generation Smith Edison that utilizes our Smith Drive, Smith Power and Smith Link technologies. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also are developing and plan to introduce in early 2012 a Newton model that is configured as a step van. We expect this model will have a GVW of approximately 14,000 to
22,000&nbsp;pounds, a payload capacity of approximately 2,700 to 10,000&nbsp;pounds and a range of up to 40 to 120&nbsp;miles depending on battery configuration. We expect the vehicle will be
used primarily for delivery of parcels, uniforms and baked goods. The Newton step van will utilize our Smith Drive, Smith Power and Smith Link technologies. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
production operations leverage our supply chain of component manufacturers and allow us to focus on vehicle assembly. This focus contributes to our low capital expenditure
requirements and rapidly scalable capacity, and makes our decentralized production strategy financially advantageous. To continue to drive and sustain the economic advantage of our vehicles over
diesel trucks, we are working to reduce our materials, operating and production costs, which we expect will reduce the prices of our vehicles and improve our gross margin. We have implemented a
three-phased approach to reducing costs, which we refer to as our "cost down" initiative, which we believe will help us achieve these goals. The first phase was focused on transitioning our supply
chain from low volume suppliers to a medium-volume automotive-grade supply chain. The second phase involves the transition from battery and powertrain systems produced by third party suppliers to our
Smith Power and Smith Drive systems and the implementation of multi-source volume purchasing strategies. The third phase will involve the transition of the supply chain for our ancillary components to
higher volume and lower-cost suppliers. We expect to complete all three phases of our current cost down initiative in the first half of 2012. Thereafter, we expect to pursue continuous improvements in
our supply chain and vehicle production costs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have production, research and development, sales and service facilities in Kansas City, Missouri and outside of Newcastle, England. To execute on our decentralized production
strategy, we plan to open sales, service and assembly facilities in targeted urban areas in the United States and abroad, beginning with facilities on the east and west coasts of the United States. We
expect to open the first of these facilities in New York City in the first half of 2012. We also have an established service base in the United Kingdom, where we operate four service facilities and a
fleet of approximately 100 service vehicles. Our U.K. service teams maintain both electric and traditional diesel vehicles. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OUR MARKET OPPORTUNITY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary market is commercial fleet purchasers of medium-duty vehicles, which are on-road vehicles with GVWs
ranging from 14,000 to 33,000&nbsp;pounds. Medium-duty commercial vehicles are used in, among other things, urban applications such as grocery, package and beverage delivery, utility,
and school and shuttle buses. According to J.D. Power and Associates (Q3, 2011 Medium Duty World Truck Sales), global annual sales of on-highway medium-duty commercial trucks
are expected to reach 822,197 units in 2011, with a compound annual growth rate, or CAGR, of 3.3% from 2011 to 2016. Based on our calculations, this equates to greater than a $40&nbsp;billion total
available market for these vehicles worldwide. In relation to the overall commercial vehicle market, the medium-duty commercial </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>3</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>vehicle
segment represents a niche opportunity for many traditional large-scale original equipment manufacturers, or OEMs. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>Source:
J.D. Power and Associates Global Commercial Vehicles Forecast published September&nbsp;30, 2011 </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According
to Fleet Owner Magazine, medium-duty fleet operators have an estimated current installed base of 1.2&nbsp;million vehicles in the United States. The primary
drivers impacting new purchases by these fleets are macroeconomic growth, industrial activity, fuel and maintenance costs and government spending. Vehicles in this segment are often operated within
urban centers, are driven at speeds below 50 mph and utilize depot-based routes with predictable distances, typically 50 to 100&nbsp;miles per day. In addition, fleet owners tend to maintain a large
number of vehicles, typically purchase in high volume, and can leverage economies of scale in the operation and servicing of such vehicles. Fleet size varies depending on the company, but large
consumer products and package delivery companies such as Frito-Lay North America, Inc., or Frito-Lay, Coca-Cola and FedEx have fleets in excess of 20,000 vehicles, with an
average service life of eight years. As a result, fleet owners place significant importance on total cost of ownership, which includes a vehicle's upfront cost as well as ongoing operating costs such
as fuel and maintenance. According to J.D. Power and Associates, on average, gasoline and diesel trucks in this category have a fuel economy of approximately 8.4&nbsp;miles per gallon. We estimate
that diesel trucks in this category cost between $0.15 and $0.23 per mile to maintain. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OUR COMPETITIVE STRENGTHS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the following strengths position us well to capitalize on the expected growth in demand for medium-duty
electric commercial vehicles: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Focus on commercial electric vehicles.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We believe that
adoption of electric vehicles will be fastest in commercial applications where the economic benefits are greatest, and which have predictable routes and centralized charging, thereby avoiding range
anxiety and dependence on development of public infrastructure to support electric vehicle fleets. We believe our position as a leading provider of commercial electric vehicles enables us to benefit
from this trend.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>First mover with established major commercial fleet relationships in the United States, Europe and
Asia.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We believe we are the only vehicle manufacturer selling to major commercial fleets in the United States and Europe that
exclusively produces electric vehicles. We have sold trucks to and are currently negotiating additional orders with customers such as Staples, Frito-Lay, Coca-Cola, TNT Express and DHL,
some of which are among the largest purchasers of medium-duty trucks </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>4</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>in
the world. We believe that our established relationships with large customers position us to receive additional orders from them, which will increase the recognition of our products with
prospective customers and reinforce our brand equity.  </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Proven ability to reduce the cost of our vehicles.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We
believe that wider adoption of commercial electric vehicles can be achieved by reducing their cost. We have already demonstrated our ability to reduce the cost of our vehicles. We believe our
component sourcing strategy coupled with our engineering expertise will allow us to continue to reduce the cost of our vehicles and increase their attractiveness to customers. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Low capital intensity of production.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We believe our
ability to achieve a relatively low level of capital intensity with respect to our production operations will enable us to expand more rapidly and deliver high returns on invested capital. We assemble
our vehicles using components manufactured by pre-qualified third party vendors using our specifications and designs. By purchasing components and focusing on assembly, we are able to
leverage medium-volume automotive-grade suppliers who have already achieved economies of scale, allowing us to avoid significant fixed costs and capital investment.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Our vehicle and system design facilitates component-based cost reduction and protection of our trade secrets and
know-how.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We believe our component-based approach allows us to achieve lower costs when compared to buying entire systems,
which typically carry higher margins for suppliers, and more easily and fairly fosters competition among multiple suppliers, as greater sourcing options exist for components as compared to systems.
For example, our recently introduced Smith Power battery management system allows us to purchase battery modules, rather than entire battery systems, and over time we expect to purchase battery cells
and assemble our own battery modules into packs, thereby further reducing our costs. Our powertrain provides us the ability to purchase at either a system or component level, such that we are able to
purchase motors, inverters, controllers and transmissions separately from suppliers. Our approach also allows us to continuously develop our intellectual property and to better protect our trade
secrets and know-how because no one supplier has access to our complete system design.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Modular battery system design that allows customers to configure each truck's range based on its application and
significantly impact the total cost of vehicle operation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We have designed our battery system to be modular so the same vehicle can
accept battery packs with different capacities. For example, the Smith Newton has multiple battery pack options depending on the customer's range requirements and duty cycle. The flexibility to
correctly size each vehicle's battery pack allows customers to select the most cost effective solution for their particular application, with the option to add additional capacity in order to
repurpose vehicles for new applications in the future. Together, we believe these options allow our customers to maximize each vehicle's economic return, thereby increasing the attractiveness of our
vehicles.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Focus on medium-duty commercial vehicles positions us well to avoid direct competition with
heavy-duty truck and light-duty automotive OEMs.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Incumbent heavy-duty truck manufacturers and
light-duty automotive OEMs generally are not as focused as we are on sales of medium-duty trucks due to the relatively limited sales volume opportunity. We believe that as an
early entrant with exclusive focus on medium-duty vehicles, we are well positioned to avoid direct competition with the much larger organizations that produce heavy- and
light-duty trucks. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>5</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> OUR STRATEGY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to be a leading global producer of medium-duty commercial electric vehicles. Key elements of our strategy
include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Focusing on large, well-recognized commercial operators to establish long-term customer
advocates.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We are focusing our sales efforts on industry-leading companies and governmental entities that operate substantial,
well-recognized, medium-duty commercial vehicle fleets. These entities have not only the resources available to purchase our vehicles, but also the corporate or public
commitment to support and sustain the development of the commercial electric vehicle industry. We believe this strategy will increase our sales and provide us with market credibility. Additionally,
these customers typically have well-defined fleet replacement strategies that strengthen our visibility with respect to customers' purchasing cycles and future supply needs. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Leveraging our existing vehicle technologies and platforms to diversify applications and sales
channels.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We are leveraging our current vehicle technologies and platforms to diversify applications in the United States, Europe and
Asia. We anticipate these new vehicle models will broaden our reach within our addressable market and result in increased sales to our existing customers. In addition to offering vehicles with a wider
range of GVWs, we are working with several truck and bus body manufacturers to provide specialized models, including a step van, shuttle and school buses, aircraft ground service and military
transportation. These relationships will not only allow us to offer specialized models to our commercial fleet customers, but also could open new sales channels for us, as these manufacturers also may
purchase our vehicles for resale to the end users.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Continuing to focus on technological innovation to reduce the initial cost of our
vehicles.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We are focused on improving our vehicle technologies and broadening our proprietary intellectual property rights over systems
and components incorporated into our vehicles. These strategies are intended to improve our vehicle performance and reliability, strengthen our competitive position and lower our vehicle costs. For
example, our recently introduced Smith Power battery management system allows us to purchase battery modules, and ultimately will allow us to purchase lithium-ion cells, from various
pre-qualified manufacturers. We expect that this ability to source from multiple suppliers will enable us to reduce the cost per kilowatt hour of the batteries used in our vehicles and
improve reliability.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Establishing sales, service and assembly facilities in selected local
markets.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We intend to establish sales, service and assembly facilities in select urban areas in different regions of the United States
and abroad. Our initial plans include opening facilities on the east and west coasts of the United States, including a facility in New York City, which we anticipate will open in the first half of
2012. In addition to increasing our production capacity, these new facilities will allow us to provide localized sales and service and will significantly reduce costs associated with shipping
completed trucks from our existing U.S. and U.K. locations to our customers.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Supporting and leveraging our customers' brands through branding synergies and
co-promotions.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We intend to continue helping our customers build and achieve corporate sustainability objectives and enhance
their brand images. Our efforts include co-promotional media and joint presentations at industry conferences and other public events that highlight the ongoing replacement of our
customers' legacy diesel fleets with our environmentally-friendly, 100% electric vehicles.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Providing customized battery acquisition models to our
customers.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We intend to provide purchasing options for the battery system used in our vehicles that meet our customers' varying
purchasing strategies. For example, we intend to provide our customers with the flexibility to purchase complete vehicles that include battery systems or to purchase base vehicles and separately </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>6</FONT></P>

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<UL>

<P style="font-family:times;"><FONT SIZE=2>acquire
battery systems through leasing arrangements with third parties. In the future we may offer battery leasing arrangements to our customers.  </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Working with federal and state governments to promote the electric vehicle
industry.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We work with government authorities to promote the adoption of electric vehicles and believe we are
well-positioned to benefit from support for commercial electric vehicles. Government support for the development and use of commercial electric vehicles can accelerate their adoption. Such
support ranges from tax incentives, to end-user rebates for the purchase of electric vehicles, to consortium tenders for the purchase of electric vehicles in volume. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> RISK FACTORS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business is subject to a number of risks and uncertainties that you should carefully consider prior to deciding whether to invest
in our common stock. These risks are discussed more fully in the section entitled "Risk Factors" beginning on page&nbsp;16. For example,  </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>we have had a history of losses, and we may be unable to achieve or sustain profitability;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>we have yet to achieve positive cash flow and, given our projected funding needs, our ability to generate positive cash
flow is uncertain;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>we will need access to additional financing, which may not be available to us on acceptable terms or at all, and if we
cannot access additional financing when we need it and on acceptable terms, our business, prospects, financial condition, operating results and ability to continue as a going concern could be
adversely affected;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our limited operating history makes evaluating our business and future prospects difficult, and may increase the risk of
your investment;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our future growth is dependent upon the willingness of operators of commercial vehicle fleets to adopt electric vehicles
and on our ability to produce, sell and service vehicles that meet their needs;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our business, prospects, financial condition and operating results could be adversely affected if we experience
disruptions in our supply chain or if we cannot obtain materials of sufficient quality at reasonable prices;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our business, prospects, financial condition and operating results will be adversely affected if we cannot reduce and
adequately control the costs and expenses associated with operating our business, including our costs of materials, production and sales;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>we recently transitioned the powertrains and battery systems used in our U.S.-produced vehicles to our Smith Drive and
Smith Power systems, and any difficulties we experience with the performance of these systems or our supply chain as a result of this transition could adversely affect our business, prospects,
financial condition and operating results;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our inability to effectively and quickly scale our vehicle assembly processes from low volume production to high volume
production could adversely affect our business, prospects, financial condition and operating results;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>we rely on a limited number of customers for a significant portion of our revenue, and the loss of any of these customers
could materially harm our business; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the unavailability, reduction, elimination or adverse application of government subsidies, incentives and regulations
could have an adverse effect on our business, prospects, financial condition and operating results. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>7</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> RECENT DEVELOPMENTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Senior note financing  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;14, 2011, we issued a $2.8&nbsp;million senior unsecured note, or the senior note, to one of our existing
stockholders. The senior note accrued interest at 8.00% per annum and had a maturity date of December&nbsp;31, 2011. We exchanged the senior note in connection with our 2011 convertible notes
financing discussed below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 2011 convertible notes financing  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between October&nbsp;7, 2011 and October&nbsp;31, 2011, we issued and sold in a private placement senior unsecured convertible
promissory notes, or 2011 convertible notes, and seven-year warrants to purchase 726,960 shares of our common stock for aggregate proceeds of $30.0&nbsp;million, consisting of cash
proceeds of $25.2&nbsp;million, cancellation of the $2.8&nbsp;million of indebtedness under the senior note and the conversion of approximately $2.0&nbsp;million of the outstanding balance of
the purchase price we owe to Tanfield Group&nbsp;Plc, or Tanfield, in connection with the acquisition of our Smith UK business. Each 2011 convertible note had a maturity date that was three years
from its date of issuance and accrued interest at a per annum rate of 8.50%, 12.00% and 15.00% for the first, second and third year of its term, respectively. The 2011 convertible notes converted into
shares of our Series&nbsp;C convertible redeemable preferred stock, par value $0.001 per share, or the Series&nbsp;C preferred stock, upon our receipt of $30.0&nbsp;million of proceeds from the
2011 convertible notes financing. Each warrant is exercisable at any time for the number of shares of our common stock equal to 30% of the initial principal amount of the related note divided by the
exercise price of $12.38 and is automatically exercised upon the pricing of an initial public offering of our common stock. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Series&nbsp;C preferred stock issuance  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between November&nbsp;3, 2011 and November&nbsp;8, 2011, we issued 2,431,170 shares of our Series&nbsp;C preferred stock in
connection with the conversion of all of our outstanding 2011 convertible notes. We did not receive any additional cash proceeds upon the conversion of the 2011 convertible notes into Series&nbsp;C
preferred stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Transition to next generation technologies  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recently completed the transition of the powertrain and battery system used in the U.S.-produced Smith Newton to our Smith Drive and
Smith Power technologies. In order to facilitate this transition, we temporarily suspended U.S. production of the Newton in August&nbsp;2011 and re-tooled our Kansas City production
facility. We began limited production of our second generation Newton, which includes our Smith Drive, Smith Power and Smith Link technologies, in November&nbsp;2011 and are in the process of
ramping production and integrating new vendors into our supply chain. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> COMPANY INFORMATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith Europe and its predecessor entities have existed since the early 1920s. We were incorporated in Delaware in 2009 and have been
operating on a consolidated basis with Smith Europe since January&nbsp;2011, when we acquired the business of Smith UK from Tanfield. We believe our acquisition of the Smith UK business provides us
with: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a platform on which we can expand our business internationally, particularly in Europe and Asia, where fuel costs exceed
those in the United States;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>enhanced product development capabilities as a result of access to Smith UK's engineering division; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>8</FONT></P>

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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>access to recurring service-related revenues from Smith UK's fleet management services; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Smith UK's existing vehicle technologies and the elimination of a royalty obligation to Tanfield. Smith Europe now owns
the intellectual property rights we previously licensed from Tanfield. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are headquartered in Kansas City, Missouri. Our principal executive offices are located at 12200&nbsp;N.W.&nbsp;Ambassador Drive, Suite&nbsp;326, Kansas City, Missouri 64163,
and our telephone number at this location is (816)&nbsp;464-0508. Our website address is www.smithelectric.com. Information contained on our website is not incorporated by reference into
this prospectus and you should not consider information on our website to be part of this prospectus. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>9</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> THE OFFERING  </B></FONT></P>
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<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock we are offering</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
(or&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares, if the underwriters exercise their over-allotment option in full)</FONT></TD>
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<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock offered by the selling stockholders</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:12pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
(&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares, if the underwriters exercise their option to purchase shares from the selling stockholders in full)</FONT></TD>
</TR>
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<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Over-allotment option</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:12pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT
SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock to be outstanding after this offering</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-top:12pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Use of proceeds</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:12pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>We intend to use $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million of the net proceeds to us from
this offering to redeem $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in principal amount of our outstanding 10% Series&nbsp;A secured convertible debentures, or Series&nbsp;A debentures. We intend to use the remainder of
the net proceeds to us from this offering for capital expenditures, working capital and other general corporate purposes. See the "Use of Proceeds" section of this prospectus beginning on page&nbsp;43 for more information.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:12pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>We will not receive any proceeds from the sale of shares by the selling stockholders.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Risk factors</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:12pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>You should read the "Risk Factors" section of this prospectus beginning on page 16 for a discussion of factors to
consider carefully before deciding whether to purchase shares of our common stock.</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Nasdaq Global Market symbol</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-top:12pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>"SMTH"</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
number of shares of our common stock that will be outstanding after this offering is based on 10,507,929 shares of our common stock outstanding as of November&nbsp;8, 2011 and
excludes: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>1,652,688 shares of our common stock issuable upon the exercise of stock options outstanding as of November&nbsp;8, 2011
at a weighted average exercise price of $10.45 per share;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>shares of our common stock issuable upon conversion of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in principal amount of our outstanding
Series&nbsp;A debentures at an assumed conversion price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, which is 80% of the mid-point of the price range listed on the cover page of this prospectus; and </FONT> <FONT
SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>3,000,000 shares of our common stock reserved as of the closing date of this offering for future issuance under our 2012
Incentive Plan. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless
otherwise indicated, the information in this prospectus reflects the following: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the automatic conversion of all of the outstanding shares of our Series&nbsp;B convertible redeemable preferred stock,
par value $0.001 per share, or our Series&nbsp;B preferred stock, into shares of our common stock on a one-to-one basis, immediately prior to the closing of this offering; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the automatic conversion of all of the outstanding shares of our Series&nbsp;C preferred stock into shares of our common
stock, on a one-to-one basis, immediately prior to the closing of this offering; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>10</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the automatic exercise, on a net exercise basis, of all of the warrants issued in our 2011 convertible notes financing, or
the 2011 warrants, for an aggregate of 726,960 shares of our common stock upon the pricing of this offering;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock split of our
outstanding common stock effected on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the filing of our fourth amended and restated certificate of incorporation, or our certificate of incorporation, and the
adoption of our amended and restated by-laws, or our by-laws, as of the closing date of this offering; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>no exercise by the underwriters of their over-allotment option. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>11</FONT></P>

<HR NOSHADE>
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<UL>
</UL>
</UL>
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</FONT> <FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> SUMMARY HISTORICAL FINANCIAL DATA  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The summary combined and consolidated financial data should be read together with our financial statements and the accompanying notes
appearing elsewhere in this prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The summary historical financial data in this section is not
intended to replace our historical financial statements and the accompanying notes. As of and for the periods prior to December&nbsp;31, 2010, the financial statements of Smith UK and Smith US are
presented on a combined basis. As of and for periods subsequent to January&nbsp;1, 2011, the financial statements for Smith Europe and Smith US are presented on a consolidated basis. Our historical
results are not necessarily indicative of our future results. We derived the statement of operations data for 2008, 2009 and 2010 and the balance sheet data as of December&nbsp;31, 2009 and 2010
from our audited financial statements appearing elsewhere in this prospectus. The statement of operations data for the six months ended June&nbsp;30, 2010 and 2011 and the balance sheet data as of
June&nbsp;30, 2011 are derived from our unaudited interim financial statements appearing elsewhere in this prospectus. The balance sheet data as of December&nbsp;31, 2008 is unaudited and has been
derived from accounting records of Tanfield that are not included elsewhere in this prospectus. See "Selected Historical Financial Data" for certain information regarding this data. The unaudited
interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal
recurring adjustments, necessary to state fairly our financial position as of June&nbsp;30, 2011 and results of operations for the six months ended June&nbsp;30, 2010 and 2011. Operating results
for
the six months ended June&nbsp;30, 2011 are not necessarily indicative of the results that may be expected for the year ending December&nbsp;31, 2011. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>12</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_cg78101_1_13"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Years ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Six Months ended June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except share and per share amounts)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Combined and Consolidated Statement of Operations Data:</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Revenue</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vehicle(1)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>23,827</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,223</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>14,166</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>31,930</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,633</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Service and repairs(2)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,767</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>14,631</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>18,208</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,672</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,191</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total revenue</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>35,594</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>22,854</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>32,374</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>37,602</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,824</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cost of revenue</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vehicle</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>33,117</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>13,370</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>21,671</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>40,035</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12,335</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Service and repairs</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12,175</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>14,421</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>18,124</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,945</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,165</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total cost of revenue</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>45,292</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>27,791</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>39,795</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>45,980</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>18,500</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Gross loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,698</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,937</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,421</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,378</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,676</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development expense</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,550</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,126</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,478</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,457</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>830</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Selling, general and administrative</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>13,307</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,697</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,411</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,031</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,360</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,857</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,823</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>14,889</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,488</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,190</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(25,555</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(16,760</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(22,310</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(16,866</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,866</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other expense (income)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,699</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>696</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,881</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,225</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Government grant reimbursements</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(688</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(18</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(205</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(315</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Loss on extinguishment of debt</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>971</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other expense, net</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,698</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>60</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,763</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>745</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(30,264</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(17,498</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(22,310</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(21,276</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,521</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss per share of common stock, basic and diluted(3)(4)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2.95</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1.89</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>N/A</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2.05</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.94</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares used in computing net loss per share of common stock, basic and diluted(3)(4)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,258</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,271</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>N/A</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,381</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,133</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma net loss per share of common stock, basic and diluted(3)(5)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares used in computing pro forma net loss per share of common stock, basic and diluted(3)(5)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Vehicle
revenue consists of revenues derived primarily from the sale of our Newton and Edison vehicles. Vehicle revenue also includes payments received by
us in connection with Smith Europe's, and previously Smith UK's, distribution of forklifts.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Service
and repairs revenue consists of revenues derived from the provision of fleet maintenance and repair services. These services, which are primarily
provided in the United Kingdom, include services for traditional diesel-fueled vehicles as well as for electric vehicles.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Our
basic net loss per share of common stock is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for
the period. The diluted net loss per share of common stock is computed by dividing the net loss by the weighted-average number of shares of common stock and, if dilutive, potential shares of common
stock outstanding during the period. Potential shares of common stock consist of stock options and warrants to purchase shares of our common stock (using the treasury stock method) and the conversion
of our </FONT></DD></DL>
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>13</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_cg78101_1_14"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>
 <DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
<p style="font-family:times;"></FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2>Series&nbsp;B
preferred stock, 12% senior unsecured convertible promissory bridge notes and Series&nbsp;A debentures (using the if-converted method). As we generated a loss in each
period, the potential shares of common stock would have reduced our per share loss (antidilutive) and, therefore, were excluded from the calculation.  </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Smith
Electric Vehicles Corp. was not incorporated until January 2009. Smith UK, the predecessor entity, was, in part, a division of Tanfield and, in part,
a wholly-owned subsidiary of Tanfield and did not have separately issued stock. As a result, we are unable to calculate loss per share of common stock for the year ended December&nbsp;31, 2008. See
Note&nbsp;1, "Nature of Business and Presentation" to the combined and consolidated financial statements included elsewhere in this prospectus for information regarding our acquisition of Smith UK.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Pro
forma net loss per share of common stock, basic and diluted includes shares of common stock issuable upon the automatic conversion of all of the
outstanding shares of our Series&nbsp;B preferred stock into shares of our common stock, at a one-to-one conversion ratio, immediately prior to the closing of this offering,
and the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock split of our outstanding common stock effected
on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes our consolidated balance sheet as of June&nbsp;30, 2011: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>on an actual basis;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>on a pro forma basis to reflect the filing of our certificate of incorporation, the conversion of all of our outstanding
shares of Series&nbsp;B preferred stock into 4,809,007 shares of our common stock, based on the one-to-one conversion ratio in effect as of June&nbsp;30, 2011; and the
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock split of our outstanding common stock effected
on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;; and
 </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>on a pro forma, as adjusted basis to reflect the pro forma adjustments described above, our receipt of the estimated net
proceeds to us from this offering, based on an assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share (the mid-point of the price range set forth on the cover page of this
prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, and our use of such net proceeds to us as described in "Use of
Proceeds." </FONT></DD></DL>
</UL>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="65pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>As of June&nbsp;30, 2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Actual </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Pro forma </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Pro forma, as<BR>
adjusted </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(unaudited)<BR>
(in thousands, except share<BR>
and per share data)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Combined and Consolidated Balance Sheet Data:</B></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,227</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Property, plant and equipment, net</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,747</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Working (deficit) capital</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2,918</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>38,394</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bridge notes, net of discount</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bridge note detachable warrants</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Note payable&#151;Tanfield</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,750</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;A debentures, net of discount</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10,031</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;A conversion option</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,052</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;B convertible redeemable preferred stock</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>56,688</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock warrant</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>23</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total stockholders' (deficit) equity</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(73,692</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
$1.00 increase or decrease in the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share (the mid-point of the price range set forth on the cover page of
this prospectus) would increase or </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>14</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>decrease,
as applicable, our pro forma, as adjusted cash and cash equivalents, additional paid-in capital and stockholders' equity by approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and
after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
pro forma column and the pro forma, as adjusted column in the table above do not include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>714,688 shares of our common stock issuable upon the exercise of options outstanding as of June&nbsp;30, 2011 at a
weighted average exercise price of $7.98 per share;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>938,000 shares of our common stock issuable upon the exercise of options issued after June&nbsp;30, 2011 at a weighted
average exercise price of $12.33 per share;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock issuable upon conversion of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in principal amount of our
outstanding Series&nbsp;A debentures at an assumed conversion price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, which is 80% of the mid-point of the price range listed on the cover page of this prospectus; </FONT>
<FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>726,960 shares of our common stock issuable upon the exercise, on a net exercise basis, of the 2011 warrants at a weighted
average exercise price of $12.38 per share;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the issuance in November 2011 of shares of our Series&nbsp;C preferred stock and the conversion of such shares into
2,431,170 shares of our common stock, based on a one-to-one conversion ratio; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>3,000,000 shares of our common stock reserved for future issuance under our 2012 Incentive Plan, which will become
effective in connection with the consummation of this offering. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>15</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<UL>
<UL>
</UL>
</UL>
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</FONT></P>

<!-- TOC_END -->

<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="da78101_risk_factors"> </A>
<A NAME="toc_da78101_1"> </A>
<BR></FONT><FONT SIZE=2><B>  RISK FACTORS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>Investing in our common stock involves a high degree of risk. You should carefully consider the following risks
and all other information contained in this prospectus, including our financial statements and the related notes, before investing in our common stock. If any of the following risks materialize, our
business, prospects, financial condition and operating results could be materially harmed. In such case, the price of our common stock could decline, and you may lose some or all of your
investment.</I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RISKS RELATED TO OUR BUSINESS AND INDUSTRY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We have had a history of losses, and we may be unable to achieve or sustain profitability.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have never been profitable and as of June&nbsp;30, 2011 have an accumulated deficit of $74.2&nbsp;million. We have had net
losses in each quarter since our inception. Our net losses for the six months ended June&nbsp;30, 2011 and the years ended December&nbsp;31, 2008, 2009 and 2010 were $21.3&nbsp;million,
$22.3&nbsp;million, $17.5&nbsp;million and $30.3&nbsp;million, respectively. We expect that we will continue to incur net losses during the remainder of 2011. We expect to incur significant
future expenses as we develop and expand our business, particularly when we establish our network of sales, service and assembly facilities in the United States and abroad. Following the completion of
this offering, we also expect to incur significant legal, accounting and other expenses that we did not incur as a private company. Taken together, these and other increased expenditures may make it
difficult for us to achieve and maintain future profitability. We may incur significant losses in the future for a number of reasons, including the other risks described in this prospectus, and we may
encounter unforeseen expenses, difficulties, complications, delays and other unknown events. Accordingly, we may not be able to achieve or maintain profitability. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We have yet to achieve positive cash flow and, given our projected funding needs, our ability to generate positive cash flow is uncertain.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have had negative cash flow from operating and investing activities of $24.2&nbsp;million, $26.9&nbsp;million,
$13.4&nbsp;million and $13.9&nbsp;million for the six months ended June&nbsp;30, 2011 and the years ended December&nbsp;31, 2008, 2009 and 2010, respectively. We anticipate that we will
continue to have negative cash flow for the foreseeable future as we make significant capital expenditures to open sales, service and assembly facilities and incur increased research and development,
sales and marketing, and general and administrative expenses. Our business also will at times require significant amounts of working capital to support our growth. An inability to generate positive
cash flow for the foreseeable future may adversely affect our ability to raise needed capital for our business on reasonable terms, diminish supplier or customer willingness to enter into transactions
with us, and have other adverse effects that may decrease our long-term viability. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We will need access to additional financing, which may not be available to us on acceptable terms or at all. If we cannot access additional financing when we need it and on
acceptable terms, our business, prospects, financial condition, operating results and ability to continue as a going concern could be adversely affected.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our growth-oriented business plan to design, produce, sell and service commercial electric vehicles using a decentralized production
model will require continued capital investment. We have received a report from our independent registered public accounting firm on our 2010 financial statements that contains an explanatory
paragraph stating that our recurring losses from operations, negative working capital and stockholders' capital deficiency and the uncertainty around our ability to raise additional capital raise
substantial doubt about our ability to continue as a going concern. We expect that our cash and cash equivalent balances, together with our anticipated cash from operating activities, will be
sufficient to fund our operations, including our planned capital expenditures and research and development activities, through the first quarter of 2012. However, if our operating costs exceed our
expectations or if we incur any significant unplanned expenses, we may need to raise additional funds </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>16</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>through
the issuance of equity, equity-related or debt securities or by obtaining credit from government or financial institutions. This capital will be necessary to fund our ongoing operations,
continue research, development and design efforts, open our sales, service and assembly facilities, improve infrastructure and introduce new or improve existing vehicle models. We cannot be certain
that additional financing will be available to us on favorable terms when required, or at all, particularly given that we do not now have a committed credit facility with any government or financial
institution. If we cannot obtain additional financing when we need it and on terms acceptable to us, our business, prospects, financial condition, operating results and ability to continue as a going
concern could be adversely affected. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our limited operating history makes evaluating our business and future prospects difficult, and may increase the risk of your investment.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You must consider the risks and difficulties we face as an early stage company with limited operating history in evaluating an
investment in our common stock. If we do not successfully address these risks and difficulties, including the other risks discussed in this prospectus, our business, prospects, financial condition and
operating results may be adversely affected. Although Smith Europe and its predecessor entities have existed since the early 1920s, Smith was formed in January 2009 and Smith and Smith Europe have
been operating as a consolidated company only since January 2011. Further, we have sold the Smith Newton in the United States only since December 2009 and our current senior management team has been
with us only since May 2011. As such, we have a very limited operating history on which investors can base an evaluation of our business, prospects and operating results, which may increase the risk
of their investment. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our future growth is dependent upon the willingness of operators of commercial vehicle fleets to adopt electric vehicles and on our ability to produce, sell and service
vehicles that meet their needs. If the market for commercial electric vehicles does not develop as we expect or develops more slowly than we expect, our business, prospects, financial condition and
operating results will be adversely affected.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our growth is dependent upon the adoption of electric vehicles by operators of commercial vehicle fleets and on our ability to produce,
sell and service vehicles that meet their needs. The entry of commercial electric vehicles into the medium-duty commercial vehicle market is a relatively new development, particularly in
the United States, and is characterized by rapidly changing technologies and evolving government regulation, industry standards and customer views of the merits of using electric vehicles in their
businesses. As such, we believe that operators of commercial vehicle fleets consider a number of factors when deciding whether to purchase our commercial electric vehicles (or commercial electric
vehicles generally) or vehicles powered by internal combustion engines, particularly diesel-fueled vehicles. We believe these factors include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the difference in the initial purchase prices of commercial electric vehicles and vehicles with comparable GVWs powered by
internal combustion engines, both including and excluding the impact of government and other subsidies and incentives designed to promote the purchase of electric vehicles;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the total cost of ownership of the vehicle over its expected life, which includes the initial purchase price and ongoing
operating and maintenance costs;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the availability of tax and other governmental incentives to purchase and operate electric vehicles and future regulations
requiring increased use of nonpolluting vehicles;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>government regulations and economic incentives promoting fuel efficiency and alternate forms of energy; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>fuel prices, including volatility in the cost of diesel;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>corporate sustainability initiatives; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>17</FONT></P>

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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>commercial electric vehicle quality, performance and safety (particularly with respect to lithium-ion battery
packs);  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the quality and availability of service for the vehicle, including the availability of replacement parts; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the limited range over which commercial electric vehicles may be driven on a single battery charge; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>access to charging stations and standardization of electric vehicle charging systems;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>electric grid capacity and reliability; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>macroeconomic factors. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If,
in weighing these factors, operators of commercial vehicle fleets determine that there is not a compelling business justification for purchasing commercial electric vehicles,
particularly those that we
produce and sell, then the market for commercial electric vehicles may not develop as we expect or may develop more slowly than we expect, which would adversely affect our business, prospects,
financial condition and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
our customers are unable to efficiently and effectively integrate our electric vehicles into their existing commercial fleets our sales may suffer and our business, prospects,
financial condition and operating results may be adversely affected. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
sales strategy involves a comprehensive plan for the pilot and roll-out of our electric vehicles, as well as the ongoing replacement of existing commercial vehicles with
our electric vehicles, that is tailored to the individual needs of our customers. If we are unable to develop and execute fleet integration strategies or fleet management support services that meet
our customers' unique circumstances with minimal disruption to their businesses, our customers may not realize the economic benefits they expect from our electric vehicles. If this were to occur, our
customers may not order additional vehicles from us, which could adversely affect our business, prospects, financial condition and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our business, prospects, financial condition and operating results will be adversely affected if we cannot reduce and adequately control the costs and expenses associated
with operating our business, including our materials and production costs.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We incur significant costs and expenses related to procuring the materials and components required to produce our commercial electric
vehicles and assembling vehicles. As a result, without including the impact of government or other subsidies and incentives, the purchase prices for our commercial electric vehicles currently are
substantially higher than the purchase prices for diesel-fueled vehicles with comparable GVWs. Through our cost down initiative, we are attempting to reduce our materials and production costs to the
point where the upfront cost of our vehicles, excluding the battery system and the impact of government subsidies and incentives, is competitive with or a slight premium to the upfront cost of diesel
trucks with comparable GVWs. We have had some success reducing our cost of revenue, however, the cost of producing our vehicles currently exceeds the sales prices of our vehicles. If we are unable to
reduce costs effectively, we will not be able to sustain our current pricing and therefore may lose sales to lower priced competitors and we may not be able to achieve profitability. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>18</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> Because we assemble vehicles from components supplied by third parties, we are particularly dependent on those third parties to deliver raw materials, parts, components and
services in adequate quality and quantity in a timely manner and at reasonable prices. Our business, prospects, financial condition and operating results could be adversely affected if we experience
disruptions in our supply chain or if we cannot obtain materials of sufficient quality at reasonable prices.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our production operations depend on obtaining raw materials, parts and components, manufacturing equipment and other supplies, and
services from reliable suppliers in adequate quality and quantity in a timely manner. For example, we purchase the chassis and cab for the Smith Newton from Avia Ashok Leyland Motors S.R.O., or Avia,
located in the Czech Republic; the battery system for our vehicles from A123 Systems,&nbsp;Inc., or A123, and Valence Technology,&nbsp;Inc., or Valence; the charger for the Smith Newton from EDN
Group&nbsp;S.r.l., or EDN, located in Italy; the charger for the Smith Edison from BRUSA Electronik AG, located in Switzerland; and the powertrain for our vehicles from Magnetic Systems Technology
Limited, or MagTec, located in the United Kingdom, and Enova Systems, Inc., or Enova. In cases where we rely on one supplier for a component or system, it may be difficult for us to substitute one
supplier for another, increase the number of suppliers or change one component for another in a timely manner or at all due to interruption of supply, dependence on a sole source supplier or increased
industry demand. We may not be able to shift our supply chain to alternative suppliers if any of our significant suppliers experience financial distress, as has been common in the motor vehicle
industry over the past several years. Furthermore, many of our current suppliers are small companies that produce a limited number of specialized products, which may make them attractive acquisition
targets. If any of these suppliers were acquired by a competitor of ours or any other third party that determines to discontinue our supply relationship, we would need to find an alternative supplier,
which we may not be able to do. If we are unable to maintain a consistent, high quality and cost effective supply chain, our business, prospects, financial condition and operating results could be
adversely affected. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
currently depend on sole source suppliers or a limited number of suppliers for our primary vehicle systems and certain key raw materials and component parts used in producing and
developing our vehicles. For example, we purchase approximately 96%, based on value, of the over 530 parts used in the assembly of the U.S.-produced Smith Newton from sole source suppliers. We
generally purchase materials pursuant to purchase orders placed from time to time and have only a limited number of long-term contracts and other guaranteed supply arrangements with our
sole or limited source suppliers. As a result, many of our suppliers may not be able to meet our requirements relative to specifications and volumes for certain key raw materials and components, and
we may not be able to locate alternative sources of supply at an acceptable cost. Additionally, if a sole source supplier ceases to continue to produce a component with little or no notice to us or
significantly increases the cost of the component, whether due to increased market demand, limited supply or other reasons, our business could be harmed. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We recently transitioned the powertrains and battery systems used in our U.S.-produced vehicles to our Smith Drive and Smith Power systems, and any difficulties we
experience with our supply chain as a result of this transition could adversely affect our business, prospects, financial condition and operating results.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the transition to our Smith Drive and Smith Power systems is critical to reducing the cost of our commercial electric
vehicles to a level that, even without the benefit of government subsidies and incentives, is competitive with or a slight premium to the cost of diesel-fueled vehicles with comparable GVWs and to our
ability to profitably grow our business. In connection with this transition, we moved to a new supply chain, including suppliers with which we have limited or no prior experience. We cannot be certain
that these third parties will be willing or able to supply materials and components at prices, in quantities and on other terms acceptable to us and, if they are not, that we will be able to otherwise
fulfill our supply needs on acceptable terms. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of our new suppliers are unable to scale to meet our production, cost and quality requirements, our business, prospects, financial condition and operating results could be
adversely affected. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>19</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> If we are unable to scale our vehicle assembly processes effectively and quickly from low volume production to high volume production, our business, prospects, financial
condition and operating results could be adversely affected.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our existing production model is well suited for the low volume production of our vehicles, but may not be well suited for the high
volume production we will require if demand significantly increases for our commercial electric vehicles. Our ability to scale our vehicle assembly process is in part dependent on our ability to
execute on our decentralized production strategy. For more information about the risks associated with our decentralized production strategy, see "&#151;Our decentralized assembly, sales and
service model will present numerous challenges, including site selection for and build-out of new facilities, consistent quality control across facilities and hiring sufficiently skilled
employees. If we are unable to execute on our plan to establish sales, service and assembly facilities in the urban areas we have targeted or if our facilities in any of those markets underperform
relative to our expectations, our business, prospects, financial condition and operating results may be adversely affected" below. If we are unable to scale our existing assembly processes and systems
quickly while maintaining our current quality level, we may be unable to meet our customers' vehicle quality and quantity requirements or our forecasted production schedule or lower our cost of
revenue. As a result, we may not be able to meet our customers' delivery schedules and could face the loss of customers, or be exposed to liability to
customers to which we promised delivery, which could adversely affect our business, prospects, financial condition and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We rely on a limited number of customers for a significant portion of our revenue and our future growth, and the loss of any of these customers could materially harm our
business.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A significant portion of our total revenue and vehicle revenue is generated from a limited number of vehicle customers. For the year
ended December&nbsp;31, 2010 and for the six months ended June&nbsp;30, 2011, four and two of our customers, respectively, collectively accounted for approximately 40% and 62%, respectively, of
our total revenue; and 60% and 73%, respectively, of our vehicle revenue. Frito-Lay accounted for 66% of our vehicle revenue for the six months ended June&nbsp;30, 2011.
Staples,&nbsp;Inc., Frito-Lay and Sainsbury's accounted for 24%, 14% and 12%, respectively, of our vehicle revenue for the year ended December&nbsp;30, 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore,
our growth strategy is premised on expanding our relationships with our largest customers, which increases our dependence on their continued business. Although we expect to
broaden our customer base over time by leveraging our existing relationships and through our acquisition of Smith UK, we expect that most of our revenue will continue, for the foreseeable future, to
come from a relatively small number of customers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
contracts with our customers currently do not include long-term commitments or minimum volumes that ensure future sales of our vehicles. Rather, our customers place
orders for a specified number of vehicles on a purchase order basis, which may be cancelled without financial penalty to the customer. Consequently, our financial results may fluctuate significantly
from period-to-period based on the actions of one or more significant customers. A customer may take actions that affect us for reasons that we cannot anticipate or control,
such as reasons related to the customer's financial condition, changes in the customer's business strategy or operations or as the result of the perceived performance or cost-effectiveness
of our vehicles. The loss of or a reduction in sales or anticipated sales to our most significant customers could have an adverse effect on our business, prospects, financial condition and operating
results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> The unavailability, reduction, elimination or adverse application of government subsidies, incentives and regulations could have an adverse effect on our business,
prospects, financial condition and operating results.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that, currently, the availability of government subsidies and incentives is an important factor considered by our customers
when purchasing our vehicles, and that our growth depends in part </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>on
the availability and amounts of these subsidies and incentives. Any reduction, elimination or discriminatory application of government subsidies and incentives because of budgetary challenges,
policy changes, the reduced need for such subsidies and incentives due to the perceived success of electric vehicles or other reasons may result in the diminished price competitiveness of the
alternative fuel vehicle industry generally and our commercial electric vehicles in particular, especially prior to the completion of our current cost down initiative. For example, in the United
States, we and our customers benefit from significant subsidies in connection with the purchase of our vehicles under the California Hybrid Truck and Bus Voucher Incentive Program, or HVIP, Smith
Electric Vehicles Medium-Duty Electric Vehicle Demonstration Project, or the EV Demonstration Project, and state-level Clean Cities programs. Under these programs, purchasers of our
vehicles are eligible to receive subsidies or incentives of up to $20,000, $71,000 and $94,000, respectively, per vehicle purchased from us. See "Business&#151;Government Programs and
Incentives" for more information about the government subsidy and incentive programs in which we or our customers may participate. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
regulations and programs that encourage sales of electric vehicles could be eliminated or applied in a way that adversely impacts sales of our commercial electric vehicles,
either currently or at any time in the future. For example, the U.S. federal government and many state governments, as well as many national governments within the European Union, are facing severe
fiscal crises, which could result in the elimination of programs, subsidies and incentives that encourage the purchase of electric vehicles. In addition, grants made by the DOE under the American
Recovery and Reinvestment Act of 2009 to clean technology companies, such as the EV Demonstration Project grant, may be subject to a high level of scrutiny as a result of recent financial difficulties
experienced by recipients of DOE loan guarantees. If government subsidies and incentives to produce and purchase electric vehicles were no longer available to us or to our customers, or the amounts of
such subsidies and incentives were reduced, our business, prospects, financial condition and operating results could be adversely affected. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> We may not be able to obtain, agree on acceptable terms and conditions for, or continue to qualify for all or a significant portion of the government grants, loans and other
incentives for which we have applied and may in the future apply. Our inability to do so could adversely affect our ability to grow our business.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have applied for, and we assist our customers in applying for, federal and state grants, loans and tax incentives under government
programs designed to stimulate the economy and support the production of electric vehicles and advanced battery technologies. We anticipate that in the future there may be new opportunities for us to
apply for grants, loans and other incentives from federal, state and foreign governments on our own behalf and on behalf of our customers. Our and our customers' ability to obtain funds or incentives
from government sources is subject to the availability of funds under applicable government programs and approval of our and our customers' applications to participate in such programs. The
application process for these funds and other incentives is and will continue to be highly competitive. We are eligible to receive, subject to certain conditions, some or all of which we may not be
able to satisfy, up to $32.0&nbsp;million of funding under the EV Demonstration Project (up to $4.0&nbsp;million of which is available to us and $28.0&nbsp;million of which is available to
compensate our customers for their participation in the project) and, as of September&nbsp;30, 2011, we and our customers have received approximately $14.7&nbsp;million of incentives under the
project. However, we cannot assure you that we will be successful in obtaining additional grants, loans or other incentives. Moreover, our ability to obtain funds under state programs will depend on
the continued availability of state funding for such programs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With
respect to the funding that we have been awarded and the grants, loans and other incentives that we may be awarded, we may not be able to satisfy or continue to satisfy the
requirements and milestones imposed by the granting authority as conditions to receipt of the funds or other incentives on a timely basis or at all. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>21</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
example, we are subject to annual audits in connection with the EV Demonstration Project and have been and may in the future be subject to additional audits by the Defense Contract
Audit Agency, or DCAA, which is performing such audits for the DOE. A DCAA audit of us, completed in October 2010, revealed significant deficiencies that are considered to be material weaknesses in
our accounting system for accumulating and billing costs under government contracts or financial assistance agreements, including our process for submitting reimbursement claims, our timing for
submitting rebates to our customers and our calculation of indirect costs to be reimbursed by the DOE. The DCAA audit report recommended that reimbursement of expenditures for fixed assets, direct
labor and overhead costs be discontinued under the project until we remedy these issues. In January 2011, we responded to the DOE regarding the DCAA audit findings. Based on this response, the DOE
confirmed in July 2011 that it would resume reimbursements for qualified fixed asset expenditures and direct labor costs incurred by us in connection with the EV Demonstration Project. We have
submitted additional requested information to the DOE and are awaiting a decision on whether the DOE will
resume reimbursement of qualified indirect costs and overhead costs. If the DCAA concludes that our remedial steps taken in response to the current DCAA audit are insufficient or a future DCAA audit
concludes that we continue to have material weaknesses in our accounting system for accumulating and billing costs under government contracts or financial assistance agreements, the DOE could
terminate the EV Demonstration Project and we and our customers would lose access to the remaining $17.3&nbsp;million of funding available under the project as of September&nbsp;30, 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, the EV Demonstration Project and other federal government programs which in the future may make awards to us require us to spend a portion of our own funds for every
incentive dollar we receive or are permitted to borrow and limit the time period in which we must use the funds awarded to us. The EV Demonstration Project, for example, requires us to fund up to
$36.0&nbsp;million, or 53.0%, of the total cost of our project prior to November&nbsp;30, 2014, the termination date of the project. We also are required to deliver 510 vehicles by
September&nbsp;30, 2013 under this program. If we are unable to fund our share of these projects or deliver the required number of vehicles, we will not receive all of the amounts that are available
to us from the government, which could adversely affect our revenues, our customer relationships and our ability to improve our vehicle technologies or expand our production, sales and service
capacity. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We have only a limited number of long-term supply contracts with guaranteed pricing, which exposes us to fluctuations in component, materials and equipment
prices. Substantial increases in these prices would increase our operating costs and could adversely affect our business, prospects, financial condition and operating results.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because we have only a limited number of long-term supply contracts with guaranteed pricing, we are subject to fluctuations
in the prices of the raw materials, parts and components and equipment we use in the production of our vehicles. In addition, currency fluctuations and a weakening of the U.S. dollar or the British
pound against foreign currencies may adversely affect our purchasing power for such raw materials, parts and components and manufacturing equipment from foreign suppliers. Substantial increases in the
prices for such raw materials, components and equipment would increase our operating costs, and could reduce our margins if we cannot recoup the increased costs through increased vehicle prices. There
can be no assurance that we will be able to recoup these increased costs by increasing the prices of our commercial electric vehicles, which already have a higher purchase price than diesel trucks
with comparable GVWs. Any attempts to increase the announced or expected prices of our commercial electric vehicles in response to increased costs could be viewed negatively by our customers and could
adversely affect our business, prospects, financial condition and operating results. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> Our service model may be costly for us to operate and may not address the service requirements of our existing or prospective customers.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All-electric commercial vehicles incorporate new and evolving technologies and require specialized service. We currently
service the commercial electric vehicles we have sold in the United States by sending technicians from our Kansas City, Missouri facility to the customer's location. We have more extensive service
capabilities in the United Kingdom, where we have four service facilities and a fleet of service vehicles to maintain our customers' vehicles. Once we have established a sales, service and assembly
facility in a geographic area, we intend for that facility to be responsible for servicing the Smith vehicles operating in that area. We do not, however, expect to open these facilities in all of the
geographic areas in which our existing and potential customers may operate our vehicles. In order to address the service needs of customers that are not in close geographic proximity to our sales,
service and assembly facilities or an existing service depot, we plan to deploy technicians from our closest facility to service the vehicles at the customer's location. These special service
arrangements are now and in the future may continue to be costly for us and we may not be able to recoup the costs of providing these services to our customers. In addition, a number of potential
customers may choose not to purchase our commercial electric vehicles because of the lack of a more widespread service network. If we do not adequately address our customers' service needs, our brand
and reputation may be adversely affected, which, in turn, could have an adverse effect on our business, prospects, financial condition and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our decentralized assembly, sales and service model will present numerous challenges, including site selection for and build-out of new facilities, consistent
quality control across facilities and hiring sufficiently skilled employees. If we are unable to execute on our plan to establish sales, service and assembly facilities in the urban areas we have
targeted or if our facilities in any of those markets underperform relative to our expectations, our business, prospects, financial condition and operating results may be adversely affected.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our strategy of establishing sales, service and assembly facilities in selected urban areas in the United States and abroad is
substantially different from the prevailing centralized manufacturing and franchised distribution and service model used in the motor vehicle industry and presents significant risks. Opening a sales,
service and assembly facility in any market will require, among other things, establishing a local order volume that is sufficient to support the facility, finding a suitable and available location,
negotiating a satisfactory lease agreement for the facility, obtaining permits and approvals from local and state authorities (and in the case of facilities to be opened in foreign countries, may
require obtaining approvals from national governments), building out the facility to our specifications and hiring and training employees to assemble, sell and service our vehicles. We plan to seek
state and local government incentives to open sales, service and assembly facilities in the markets we have selected, but we may not be successful in this effort, or the incentives may not be as
significant as we would like. As with any development project, the development and build-out of a facility will subject us to the risk of cost-overruns and delays, which may be
significant. Further, given the novelty and relative scarcity of our commercial electric vehicles compared to other types of commercial vehicles, we may have difficulties locating sufficient numbers
of experienced, skilled assembly and service technicians in any market we select. Once our sales, service and assembly facilities are open for business, we will need to ensure that they maintain a
high level of quality in order to enhance the Smith brand. Even if we are able to address all of the challenges discussed above, and there are no assurances we will be able to, our sales, service and
assembly facilities in one or more markets may not be profitable and we may lose our entire investment in such facilities. If we are unable to establish the local order volume we require in order to
open new sales, service and assembly facilities or are unable to successfully open and profitably operate these new facilities in our target markets, our business, prospects, financial condition and
operating results may be adversely affected. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>23</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> If our vehicles fail to perform as expected, our business, prospects, financial condition and operating results could be adversely affected.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our vehicles may not perform in a manner that is consistent with our customers' expectations for a variety of reasons. Many of our
first generation vehicles have experienced maintenance problems, which has resulted in increased service costs and management time spent to address the customer relationship. We believe we have
responded promptly to and have appropriately addressed our customers' maintenance concerns; however, in some cases our relationship with our customers has been impaired as a result of these issues.
Further, in the past we have experienced
performance issues with the powertrain system previously used in the Smith Newton, which resulted in production delays. As a result, we temporarily suspended U.S. production while we performed
extensive testing on the new powertrain components we use in our second generation Newton. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vehicles
that we produce and sell in the future also may contain defects in design and manufacture that cause them not to perform as expected or that may require repair. Further, the
performance of our vehicles may be negatively impacted by other factors, such as limitations inherent in existing battery technology and extreme weather conditions. We have performed extensive
internal testing on our current vehicle offerings and on our Smith Drive and Smith Power technologies, however, our vehicles and vehicle technologies, particularly our Smith Drive and Smith Power
technologies, have limited field experience. As such, there can be no assurance that we have detected, and in the future will be able to detect and fix, all defects in our vehicles prior to their
delivery to customers. Furthermore, there can be no assurance that our vehicle technologies will function properly over the entire useful lives of our vehicles. If defects in our vehicles exist or our
vehicle technologies do not perform over time in the manner we expect, we could be required to incur significant costs to fix such defects, replace vehicle systems and/or conduct recalls of our
vehicles, which could adversely affect our brand, business, prospects, financial condition and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
product defect or other failure of our commercial electric vehicles to perform as expected could result in customer losses, adverse publicity, lost revenue, delivery delays, product
recalls, product liability claims, harm to our brand and reputation, and significant warranty and other expenses, any of which could have an adverse effect on our business, prospects, financial
condition and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our warranty reserves may be insufficient to cover future warranty claims and we may incur significant non-warranty maintenance and repair costs, each of which
could adversely affect our financial performance.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have expended significant time and resources performing warranty maintenance on the vehicles we have sold in the United States and
United Kingdom and, as of June&nbsp;30, 2011, have a warranty reserve of $7.9&nbsp;million, or approximately 21.0% of our total revenue for the six months ended June&nbsp;30, 2011, to cover our
expected warranty obligations in future periods. We record and adjust warranty reserves based on changes in estimated costs and actual warranty costs. In the United States, a significant portion of
our warranty maintenance has involved the battery packs and inverters that were used in the Smith Newton until our transition to our Smith Drive and Smith Power technologies. In the United Kingdom, a
significant portion of our warranty maintenance has involved the battery packs, driveline components and chargers used in the Smith Edison. We could in the future become subject to additional
significant and unexpected warranty expense, and there can be no assurances that our existing warranty reserves will be sufficient to cover all claims. If our warranty reserves are inadequate to cover
future warranty claims on our vehicles, our business, prospects, financial condition and operating results could be adversely affected. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also may incur significant maintenance and repair costs for non-warranty work we perform on our customers' vehicles. We believe that our growth depends in part on our
customers
becoming advocates for our business and vehicles and, as such, we may choose to perform non-warranty service on their vehicles without charge in order to ensure their satisfaction. Any
costs and expenses related to such maintenance would increase our service and repairs cost of revenue and, if such amounts become significant, could adversely affect our financial condition and
operating results. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>24</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> If we are unable to keep up with advances in electric vehicle technology, we may suffer a decline in our competitive position.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are companies in the electric vehicle industry that have developed or are developing vehicles and technologies that compete or
will compete with our vehicles. We cannot assure you that our competitors will not be able to duplicate our technology or provide products and services similar to ours more efficiently. If for any
reason we are unable to keep pace with changes in commercial electric vehicle technology, particularly battery technology, our competitive position may be adversely affected. We plan to upgrade or
adapt our vehicles and introduce new models in order to continue to provide commercial electric vehicles that incorporate the latest technology, as we are doing with our Smith Drive and Smith Power
technologies. However, there are no assurances that our research and development efforts will keep pace with those of our competitors. If we cannot keep pace with our competitors, our commercial
electric vehicles may not compete effectively with other available electric vehicles which could have an adverse effect on our position in our industry and on our business and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our commercial electric vehicles compete for market share with trucks powered by other vehicle technologies that may prove to be more attractive than ours.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our target market currently is serviced by truck manufacturers with existing customers and suppliers using proven and widely accepted
diesel fuel technologies. Additionally, our competitors are working on developing technologies such as cleaner diesel engines, bio-diesel, fuel cells, natural gas and hybrid
battery/internal combustion engines that may be introduced in our target market. If any of these alternative technology vehicles can provide lower fuel costs, greater efficiencies, greater reliability
or otherwise benefit from other factors resulting in an overall lower total cost of ownership, this may negatively affect the commercial success of our vehicles or make our vehicles uncompetitive or
obsolete. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Many of our competitors have greater financial and other resources, longer operating histories and greater name recognition than we do and one or more of these competitors
could use their greater resources and/or name recognition to gain market share at our expense.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many of our existing and potential competitors, including Ford Motor Company, or Ford, Navistar International Corporation, or Navistar,
Freightliner Custom Chassis, or Freightliner, PACCAR Inc., or PACCAR, Hino Trucks USA, or Hino, Mitsubishi Fuso, or Fuso, and the Volvo Truck Corporation, or Volvo, have substantially greater
financial resources, more extensive engineering, manufacturing, marketing and customer service and support capabilities, longer operating histories and greater name recognition than we do. As a
result, our competitors may be able to compete more aggressively and sustain that competition over a longer period of time than we can. Each of these competitors has the potential to capture market
share in our target market, which could have an adverse effect on our position in our industry and on our business and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> If we are unable to design, produce, market and sell new electric vehicles that address additional market opportunities, our business, prospects, financial condition and
operating results could be adversely affected.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may not be able to successfully develop new commercial electric vehicles, address new market segments or the needs of customers in
our existing market, or develop a broader customer base. To date, we have focused our business on the sale of commercial electric vehicles that primarily address the needs of medium-duty,
depot-based commercial fleet operators. In the United States, we have addressed this market by offering the Smith Newton, a 16,500 to 26,400 pound truck (by GVW), while in the United Kingdom and other
countries where we have distribution partners, we have addressed this market by offering both the Smith Newton and the smaller Smith Edison, a 7,700 to 10,100 pound truck (by GVW) that is offered as a
chassis cab, van and minibus. In order to expand our U.S. customer base, we plan to introduce a Newton vehicle that is configured as a step van and to further </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>expand
our Newton platform to accommodate additional applications, such as delivery and transit. However, we may be unable to increase the number of applications for which our Newton platform may be
used, which could adversely affect our business, prospects, financial condition and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We depend on the business of customers that are larger than we are and who may have significant leverage over us in negotiations related to the purchase price of our
commercial electric vehicles. If we are forced to sell our vehicles at lower prices than we anticipate, our business, prospects, financial condition and operating results will be adversely affected.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our strategy has been, and will continue to be, to pursue business relationships with industry-leading companies that operate
substantial, depot-based, medium-duty commercial vehicle fleets. All of these customers are larger than we are, and wield a significant amount of purchasing power. These customers may in
the future require us to reduce the purchase prices of our commercial electric vehicles to levels that are lower than we anticipate, which may reduce our gross margins or result in negative gross
margins. To compensate for these lower gross margins, we would need to reduce our expenses, which we may be unable to do. If we are forced to sell our vehicles at lower prices than we anticipate and
are unable to compensate for these lower prices by reducing our expenses, our business, prospects, financial condition and operating results will be adversely affected. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> If we are unable to convince the marketplace that we have sufficient access to liquidity and positive long-term business prospects we may not be able to expand
our business and our prospects, financial condition and operating results may be adversely affected.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our prospects, financial condition and operating results may be adversely affected if we are unable to establish and maintain
confidence about our liquidity and business prospects among customers and within our industry. Our vehicles are highly technical products that require maintenance and support. If we were to cease or
cut back operations, even years from now, buyers of our vehicles from years earlier might have much more difficulty in maintaining their vehicles and obtaining satisfactory support. As a result,
customers may be less likely to purchase our vehicles now if they are not convinced that our business will succeed or that our operations will continue for many years. Similarly, suppliers and other
third parties will be less likely to invest time and resources in developing business relationships with us if they are not convinced that our business will succeed. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accordingly,
in order to build and maintain our business, we need access to liquidity and we must maintain confidence among customers, suppliers and other parties in our liquidity and
long-term business prospects. We believe that maintaining such confidence may be particularly complicated by factors such as the following: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our limited operating history;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our limited revenues and lack of profitability to date;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>uncertainty about the long-term marketplace acceptance of commercial electric vehicles; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the prospect that we will need access to additional capital to fund our planned operations;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the breadth of our expansion plans relative to our existing capital base and scope and history of operations; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the prospect or actual emergence of direct, sustained competitive pressure from larger, more well-capitalized
commercial vehicle makers. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many
of these factors are largely outside our control, and any negative perceptions about our liquidity or long-term business prospects, even if exaggerated or unfounded, may
harm our business and make it more difficult to raise additional funds when needed. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> We have identified material weaknesses in our internal control over financial reporting. If we fail to remediate these weaknesses and maintain proper and effective internal
controls, our ability to produce accurate and timely financial statements could be impaired, which could negatively impact our operating results, our ability to operate our business and investors'
views of us.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate
financial statements on a timely basis is a costly and time-consuming effort that needs, and is required under Securities and Exchange Commission, or SEC, rules, to be evaluated
frequently. In connection with the audit of our financial statements for 2008, 2009 and 2010, we identified material weaknesses in our internal control over financial reporting. A material weakness is
defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual
or interim financial statements will not be prevented or detected on a timely basis by the company's internal controls. The material weaknesses for the year ended and as of December&nbsp;31, 2010
were as follows: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>We did not have an adequate number of personnel in our accounting and finance department with sufficient technical
accounting expertise and, as a result, we could not evaluate in a timely manner the accounting implications of our business transactions. For example, our inventory costing system was inadequate to
produce a measure of cost of revenue on a U.S. generally accepted accounting principles, or GAAP, basis and we did not properly manage the accrual process related to cutoffs at the end of reporting
periods.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>We did not design or maintain effective internal controls over the financial statement close and reporting process in
order to ensure the accurate and timely preparation of financial statements in accordance with GAAP. For example, we did not compare our actual results to our budget, we allowed individuals to process
journal entries without supervisor approval or review, and we had not established information technology control policies.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>We did not maintain adequate segregation of duties within the accounting and finance department. As result, we had an
increased fraud risk. Compensating controls such as budget to actual reviews and a robust reconciliation processes had not been adequately implemented to provide for the timely identification of
fraudulent activity. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are in the process of taking the necessary steps to remediate the material weaknesses that we identified and have made enhancements to our control procedures; however, the material
weaknesses will not be remediated until the necessary controls have been implemented and are operating effectively. We do not know the specific time frame needed to fully remediate the material
weaknesses identified. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
cannot assure you that our efforts to fully remediate these internal control weaknesses will be successful or that similar or different material weaknesses will not develop. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Implementing
any appropriate changes to our internal controls may distract our management and employees, entail substantial costs to implement new, and modify existing, processes and
take significant time to complete. Moreover, these changes do not guarantee that we will be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy,
or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and harm our business. In addition, investors' perceptions that our internal
controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm our stock price and make it more difficult for us to effectively market and sell our
vehicles to new and existing customers. For a more detailed discussion of our material weaknesses, see "Management's Discussion and Analysis of Financial Condition and Results of
Operations&#151;Internal Control Over Financial Reporting." </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> If we are unable to implement new enterprise-wide accounting, information technology and other systems, our growth, profitability and operating results may be
adversely affected.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following our acquisition of Smith UK on January&nbsp;1, 2011, we began the process of upgrading and implementing accounting,
information technology and other systems enterprise-wide, which we expect will be completed by the end of 2011. Our new systems may not operate as we expect them to, and we may be required
to expend significant resources to correct problems or find alternative sources for performing these functions. For example, shortly after we began our upgrade process, our new information technology
system experienced successive failures, which delayed our close process for our quarter ended June&nbsp;30, 2011. Among the risks associated with developing, improving and expanding our core systems
is supply chain disruption, which may affect our ability to obtain supplies when needed or to deliver vehicles to our customers. There are no assurances that our expanded systems will be fully or
effectively implemented on a timely basis, if at all, or that we will not experience additional system failures in the future. If we do not successfully implement our new enterprise-wide
systems, our operations may be disrupted and our operating results could be harmed. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> The inability of certain of our customers to obtain credit on commercially reasonable terms may adversely affect our growth prospects.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While most of our current customers are large, well-established companies with significant purchasing power, many of our
potential smaller and medium-sized customers may need to rely on credit or leasing arrangements to gain access to our vehicles. Unlike certain of our competitors who provide credit or leasing services
for the purchase of their diesel-powered vehicles, we do not provide such financial services, which could adversely affect our revenues and market share in the commercial vehicle market. Furthermore,
if leasing solutions for battery packs are not available to our customers on favorable terms when required, these customers may not be able to reduce the capital cost of purchasing our vehicles as we
expect and our business, prospects and financial condition could be adversely affected. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or adequately address competitive challenges.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may experience periods of significant growth as demand for commercial electric vehicles accelerates. Our growth may place a
significant strain on our managerial, administrative, operational, financial, information technology and other resources. Expanding a global organization and managing a geographically dispersed
workforce will require substantial management effort and significant additional investment in our infrastructure. We will be required to continue to improve our operational, financial and management
controls and our reporting procedures, and we may not be able to do so effectively. If we are unable to manage our growth effectively, our ability to
execute our business plan, maintain high levels of service and address competitive challenges will be adversely affected, which, in turn, will adversely affect our business, prospects, financial
condition and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our ability to compete could be harmed if we are unable to attract and retain key employees.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is increasing competition for talented individuals with specialized knowledge of electric vehicles and this competition affects
our ability to hire and retain key employees. The loss of the services of any of our key employees could disrupt our operations, delay the development and introduction of our commercial electric
vehicles and services, and negatively impact our business, prospects and operating results. In particular, we are highly dependent on the services of our President and Chief Executive Officer and our
Chief Technology Officer and Senior Vice President. Both of these executives are subject to employment agreements, but these agreements do not provide for any specific employment term. Our future
growth and success depend upon our ability to attract and retain our executive officers and other key technology, production, sales, service and support personnel. Any </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>failure
to do so could adversely impact our business, prospects, financial condition and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Members of our management team and board of directors are new to the company, to the electric vehicle industry and to leading a U.S. publicly-traded company, and the
execution of our business plan and development strategy could be seriously harmed if the integration of our management team or board is not successful or our management team or board does not adapt to
the demands of managing a public company.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business and prospects could be seriously harmed if the integration of our management team or board of directors is not successful.
We expect that it will take time for our management team and for our board of directors to coalesce and function with optimal efficiency, and it is too early to predict whether this integration will
be successful. Since late 2010, we have experienced significant changes in our senior management team and our current senior management team has only limited experience working together as a group.
Specifically, three of the seven members of our senior management team have joined us since November 2010 and none of these new executives have any experience in the electric vehicle industry. Our
Chief Financial Officer and our Vice President of Human Resources and Administration are the only two members of our senior management team that have served in senior roles at U.S. publicly-traded
companies. Furthermore, two of our six directors joined the board in November 2011. This lack of public company experience and of long-term experience working together on both the senior
management and board levels and limited experience in the electric vehicle industry may adversely impact our management team's
ability to quickly and efficiently respond to problems and effectively manage our business and our board's ability to provide effective guidance to and oversight of management. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> The demand for commercial electric vehicles depends, in part, on the continuation of current trends resulting from dependence on fossil fuels. Extended periods of low diesel
or other petroleum-based fuel prices could adversely affect demand for our vehicles, which would adversely affect our business, prospects, financial condition and operating results.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that much of the present and projected demand for commercial electric vehicles results from concerns about volatility in the
cost of petroleum-based fuel, the dependency of the United States on oil from unstable or hostile countries, government regulations and economic incentives promoting fuel efficiency and alternative
forms of energy, as well as the belief that climate change results in part from the burning of fossil fuels. If the cost of petroleum-based fuel decreased significantly, the outlook for the
long-term supply of oil to the United States improved, the government eliminated or modified its regulations or economic incentives related to fuel efficiency and alternative forms of
energy, or if there is a change in the perception that the burning of fossil fuels negatively impacts the environment, the demand for commercial electric vehicles could be reduced, and our business
and revenue may be harmed. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diesel
and other petroleum-based fuel prices have been extremely volatile, and we believe this continuing volatility will persist. Lower diesel or other petroleum-based fuel prices over
extended periods of time may lower the perception in government and the private sector that cheaper, more readily available energy alternatives should be developed and produced. If diesel or other
petroleum-based fuel prices remain at deflated levels for extended periods of time, the demand for commercial electric vehicles may decrease, which would have an adverse effect on our business,
prospects, financial condition and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We face risks associated with our international operations, including unfavorable regulatory, political, tax and labor conditions, which could harm our business.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We face risks associated with our existing international operations, including possible unfavorable regulatory, political, tax and
labor conditions, which could harm our business. We expect these risks to increase as we expand our international operations. These risks may increase our costs, impact our </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>ability
to sell our commercial electric vehicles and require significant management attention. These risks may include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>conforming our vehicles to various international regulatory requirements where our vehicles are sold, an undertaking
referred to as homologation;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>difficulty in staffing and managing foreign operations;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>foreign government taxes, regulations and permit requirements, including foreign taxes that we may not be able to offset
against taxes imposed upon us in the United States, and foreign tax and other laws limiting our ability to repatriate funds to the United States;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>fluctuations in foreign currency exchange rates and interest rates, including risks related to any interest rate swap or
other hedging activities we may undertake;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our ability to enforce our contractual and intellectual property rights, especially in those foreign countries that do not
respect and protect intellectual property rights to the same extent as do the United States and select European countries, increasing the risk of unauthorized and uncompensated use of our technology; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>U.S. and foreign customs and trade restrictions, anti-bribery laws, tariffs and price or exchange controls; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>foreign anti-dumping laws and regulations;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>foreign labor laws, regulations and restrictions;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>preferences of foreign nations for domestically produced vehicles;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>changes in diplomatic and trade relationships;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>political instability, natural disasters, war or events of terrorism; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the strength of international economies, particularly those in Europe. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also face the risk that our foreign currency denominated liabilities will increase if such foreign currencies strengthen quickly and significantly against the U.S. dollar or the
British pound. This risk is particularly acute because we do not currently hedge our foreign currency risk. If the value of the U.S. dollar or the British pound depreciates significantly when compared
to other currencies in which our contracts are denominated, our costs will correspondingly increase and our operating results will be adversely affected. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
we fail to successfully address these risks, our business, prospects, financial condition and operating results could be adversely affected. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> If we determine to grow our business through mergers and acquisitions, we may not realize the anticipated benefits of any transactions we enter into, which could adversely
affect our business, prospects, financial condition and operating results.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently, and from time to time in the future may, evaluate opportunities to acquire other companies in order to grow our business,
secure access to technology we use in our business or vertically integrate our company. To the extent that our future growth includes acquisitions, there are no assurances that we will successfully
identify suitable acquisition candidates, consummate such potential acquisitions, integrate any acquired entities or successfully expand into new markets as a result of our acquisitions. Growth
through mergers and acquisitions involves business risks, including unforeseen contingent risks or latent business liabilities that may only become apparent after the merger or acquisition is
completed. The key success factors of any merger and acquisition activity we may undertake will be seamless integration and effective management of the merged/acquired entity, retention of key
personnel, and generating cash flow from synergies in engineering and sourcing, joint sales and marketing efforts, and management of a larger business. If any of these factors fails to </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>materialize
or if we are unable to manage any of the associated risks successfully, our business, prospects, financial condition and operating results could be adversely affected. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We are subject to substantial regulation, which is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business
and operating results.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our commercial electric vehicles, the sale of motor vehicles in general and the electronic components used in our vehicles are subject
to substantial regulation under international, federal, state and local laws. We have incurred, and expect to incur in the future, significant costs in complying with these regulations. Regulations
related to the electric vehicle industry and alternative energy currently are evolving and we face risks associated with changes to these regulations. These risks include the
following: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>changes to the regulations governing the assembly and transportation of lithium-ion batteries, such as the UN
Recommendations on the Safe Transport of Dangerous Goods Model Regulations or regulations adopted by the U.S. Pipeline and Hazardous Materials Safety Administration, or PHMSA, the E.U. Batteries
Directive, or the E.U. Directive on the Inland Transport of Dangerous Goods could increase the cost of lithium-ion batteries;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>changes to regulations governing the exportation of our vehicles could increase our costs incurred to deliver products
outside of the United States or the United Kingdom or force us to charge higher prices for our exported vehicles;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>revisions in motor carrier safety laws in the United States and Europe to further enhance motor vehicle safety generally
and to ensure that electric vehicles achieve levels of safety commensurate with other cars and trucks could increase the costs associated with the component parts and the assembly of our vehicles; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>revisions in consumer protection laws to ensure that consumers are fully informed of the particular operational
characteristics of electric vehicles could increase our costs associated with warning labels or other related customer information dissemination. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
the extent the laws governing our business and vehicles change, some or all of our vehicles may not comply with applicable international, federal, state or local laws, and certain of
the competitive advantages of our vehicles may be reduced or eliminated, which would have an adverse effect on our business. Furthermore, compliance with changing regulations could be burdensome, time
consuming, and expensive. To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition and operating results will be adversely affected. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Vehicle dealer and distribution laws could adversely affect our ability to sell our commercial electric vehicles.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales of our vehicles are subject to international, state and local vehicle dealer and distribution laws. To the extent such laws
prevent us from selling our vehicles to customers located in a particular jurisdiction or require us to retain a local dealer or distributor or establish and maintain a physical presence in a
jurisdiction in order to sell vehicles in that jurisdiction, our business, prospects, financial condition and operating results could be adversely affected. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We are subject to various environmental laws and regulations that could impose substantial costs upon us and cause delays in opening our sales, service and assembly
facilities.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and our operations, both in the United States and abroad, are subject to national, state and/or local environmental laws and
regulations, including laws relating to the use, handling, storage, transportation, disposal and human exposure to hazardous substances and wastes. Environmental and health and safety laws and
regulations can be complex, and we expect that our business and operations will be affected by future amendments to such laws or other new environmental and health and safety laws which may require us
to change our operations. These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury and fines and penalties. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>Capital
and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties, third party damages,
suspension of production or a cessation of our operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Kansas City, Missouri production facility previously was operated by third parties, some of whom generated, stored, released, and disposed of hazardous substances at the facility. As
a result of historical operations by third parties, the facility has been subject to corrective action under the Resource Conservation and Recovery Act, as amended, or RCRA, since before we occupied a
portion of the facility. The facility is subject to deed restrictions in connection with the presence of residual contamination and annual groundwater monitoring is conducted by third-parties pursuant
to a RCRA "post-closure" permit issued to American Airlines (a prior occupant) and the City of Kansas City, Missouri (the current property owner). </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Contamination
at properties currently or formerly owned and/or operated by us, as well as at properties we will own and/or operate, and properties to which hazardous substances were sent
by us, may result in liability for us under environmental laws and regulations, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, or
CERCLA, also known as the Superfund law. CERCLA and comparable state laws can impose joint and several liability, without regard to fault, for the full cost of investigating and cleaning up hazardous
substances that have been or pose a threat of being released into the environment, for damages to natural resources, and for the costs of certain environmental and health studies. The costs of
complying with U.S. and foreign environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future, could have an adverse effect on
our financial condition or operating results. We may not be able to recover some or any of these costs from insurance. Compliance with these laws also may give rise to unexpected delays in opening our
sales, service and assembly facilities, as we may be required to obtain permits and approvals required by environmental laws. For example, the European Union imposes emission limits on and requires
permits for manufacturing facilities that may affect our facilities in the United Kingdom and other possible new sales, service and assembly facilities we wish to establish across Europe. Depending on
capacity, our new facilities may be subject to the stringent permitting and reporting requirements of the Directive on Integrated Pollution Prevention Control, the European Pollutant Release and
Transfer Register, the
Solvent Emissions Directive, the Paints Directive and Directive 2010/75/EU on Industrial Emissions, among others. Furthermore, our European production activities and our vehicles and parts that are
marketed in the European Union and/or European Economic Area, as well as those of our suppliers, are subject to the registration, evaluation, authorization and restriction procedures of the E.U.'s
REACH Regulation for chemicals. Any delays in opening our sales, service and assembly facilities as a result of regulatory challenges could adversely impact our business, prospects and operating
results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are exploring arrangements with third parties to reuse battery packs for secondary applications. Currently, if a customer returns a battery pack from one of our vehicles, we return
the battery pack to our supplier for disposal. If in the future we are required to dispose of the battery packs used in our vehicles and are unable to secure disposal arrangements with third parties,
we may be required to incur significant expenses to dispose of these battery packs in a manner that complies with applicable environmental laws and regulations. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> Our business, prospects, financial condition and operating results could be adversely affected if we are unable to secure exclusive, global rights to systems and components
we purchase from our key suppliers.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ability to expand our business depends in large part on our ability to obtain exclusive, global rights to the key systems and
components we incorporate in our vehicles. For example, in September 2010, we entered into a development, supply and license agreement with Impact Clean Power Technology&nbsp;S.A., formerly Clean
Power Technical Solutions Sp. z.o.o., or CPTS, under which CPTS granted us an exclusive, non-transferable, sublicensable license to the technology and know-how related to the
battery management system and battery pack assembly that comprises Smith Power for use in </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>commercial
electric vehicles in the United States, Canada and Mexico. Subject to CPTS's agreement, we have the ability to expand the scope of the license to cover additional territories; however,
there are no assurances that we will be able to do so on terms acceptable to us or at all. In the event that we are unable to obtain license rights on acceptable terms for additional territories in
which we sell or plan to sell our commercial electric vehicles, any vehicles sold by us in those territories could not include our Smith Power technology. This, in turn, could limit or eliminate our
ability to realize the cost savings we expect from our Smith Power technology and reduce the upfront cost of our vehicles sold in these territories. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore,
our supply agreement with Avia grants us the exclusive right to sell, service and market Avia's chassis and cabs in the electric vehicle market in North America, provided
that we meet certain minimum annual purchase requirements under the agreement. We currently expect that we will not meet these minimum purchase requirements for 2011 and, if we do not, we will lose
our exclusive rights beginning on January&nbsp;1, 2012. If we lose our exclusive rights, Avia would be able to sell its chassis and cabs to other electric vehicle manufacturers in North America,
including to our competitors, while
we would continue to be required to exclusively purchase Avia chassis and cabs for the duration of the supply agreement. If Avia sells the chassis and cabs we use in the Smith Newton to one or more of
our competitors, those competitors would receive the benefit of the technological enhancements we have developed with Avia and could produce trucks with a look and feel that is similar to those of our
vehicles, which could dilute our brand. There also is some risk that Avia would allocate production capacity to our competitors before allocating capacity to us, which could result in production
delays for us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
any of the circumstances described above were to occur, our business, prospects, financial condition and operating results could be adversely affected. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our business will be adversely affected if we are unable to protect our technology from unauthorized use or infringement by third parties.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success depends, at least in part, on our ability to protect our core technology and know-how. To accomplish this, we
rely primarily on trade secret protection and employee and third party nondisclosure and non-competition agreements. We also rely on intellectual property licenses, other contractual
rights and common law rights to establish and protect our proprietary rights in our technology. We do not own any patents and do not have any patent applications pending with the United States Patent
and Trademark Office, or the USPTO, or applicable foreign patent filing offices. We have entered into intellectual property licenses with third parties in order to obtain the intellectual property
rights necessary to produce our vehicles, including for the battery management system and battery pack and powertrain that form the basis of our Smith Power and Smith Drive technologies as well as for
the wireless data collection system and telemetry hardware that form the basis of our Smith Link technology. We do not have a written agreement with the third-party developer of the message-queuing
software component of Smith Link and may not be able to enter into any such agreement on terms acceptable to us or at all. We recently filed applications to register our adopted marks with the USPTO
and have filed applications for international trademark registration under the Madrid Protocol and in Canada for the mark "Smith." We also are in the process of filing applications to register our
marks in the European Union and other designated countries around the world. We previously relied on common law trademark protections for our adopted marks in the countries in which such protections
are available. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The protection provided by intellectual property law is and will be important to our future opportunities. However, such laws and other measures we take to
protect our intellectual property from use by others may not be effective for various reasons, including the following: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the costs associated with enforcing our intellectual property rights may make aggressive enforcement impracticable; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>current and future competitors may independently develop similar technology, duplicate our vehicles or design new vehicles
in a way that circumvents our intellectual property rights;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our in-licensed intellectual property rights may be invalidated or terminated, the holders of these
intellectual property rights may seek to breach our license arrangements, or the holders of these intellectual property rights may license these rights to current and future competitors without
breaching our license arrangements;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>any patent or trademark applications we file may not result in the issuance of patents or trademarks; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>patents, if issued, may not be broad enough to protect our proprietary rights; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>patents we in the future may be granted may be challenged, invalidated or circumvented because of the
pre-existence of similar patented or unpatented intellectual property rights or for other reasons. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Trade
secrets, in particular, are difficult to protect. We rely in part on nondisclosure and non-competition agreements with our employees, contractors, consultants and other
advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in
the event of unauthorized disclosure of confidential information. Additionally, others may independently discover our trade secrets or independently develop processes or products that are similar or
identical to our trade secrets, and courts outside of the United States and United Kingdom may be less willing to protect trade secrets. Costly and time-consuming litigation could be
necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
failure to protect our proprietary rights adequately could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage
and a decrease in our revenue, which would adversely affect our business, prospects, financial condition and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> The U.S. federal government's rights under the DOE EV Demonstration Project could adversely affect our business, financial condition and operating results.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The grant agreement that governs our participation in the DOE's EV Demonstration Project provides that, subject to certain conditions,
we may elect to retain title to any inventions conceived of or first actually reduced to practice under or during the performance of the agreement, or subject inventions. We must, however, grant the
U.S. federal government a paid-up, nonexclusive, irrevocable, worldwide license to use (or to authorize third parties to use on behalf of the federal government) such subject inventions.
The grant agreement also provides the U.S. federal government with unlimited rights in the data first produced in the performance of the grant agreement or delivered to the DOE under the agreement,
which include the right to use, disclose, reproduce, prepare derivative works, and distribute copies to the public, in any manner and for any purpose, and to have or permit others to do so. These
rights may compromise our ability to protect these inventions and data as trade secrets. Furthermore, the grant agreement requires us to substantially manufacture products that incorporate the subject
inventions in the United States, unless we obtain a waiver of this requirement. The federal </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>34</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>government's
intellectual property rights and approval rights over where we manufacture products that incorporate subject inventions could limit our ability to fully exploit the technology created
under the EV Demonstration Project and reduce our vehicle production costs, which could adversely affect our business, financial condition and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We may need to defend ourselves against intellectual property infringement claims, which may be time-consuming and would cause us to incur substantial costs.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Companies, organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights
that would prevent, limit or interfere with our ability to produce, use, develop or sell our vehicles or components, which could make it more difficult for us to operate our business. From time to
time, we may receive infringement claims from third parties relating to our vehicles and technologies. In those cases, we intend to investigate the validity of the claims and, if we believe the claims
have merit, to respond through licensing or other appropriate actions. If we are determined to have infringed upon a third party's intellectual property rights, we may be required to do one or more of
the following: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>cease producing, using, developing or selling vehicles that incorporate the challenged intellectual property; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>pay substantial damages;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>obtain a license from the holder of the infringed intellectual property right, which license may not be available on
reasonable terms or at all; or  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>redesign our vehicles. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event of a successful infringement claim against us and our inability to obtain a license to the infringed technology, our business, prospects, financial condition and operating
results could be adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs and diversion of resources and management attention. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our commercial electric vehicles make use of lithium-ion battery cells, which, if not appropriately managed and controlled, on rare occasions have been observed
to catch fire or vent smoke and flames. If any such events occur in our commercial electric vehicles, we could face liability for damage or injury, adverse publicity and a potential safety recall, any
of which could adversely affect our business, prospects, financial condition and operating results.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The battery packs in our commercial electric vehicles use lithium-ion cells, which have been used for years in laptop
computers and cell phones. On rare occasions, if not appropriately managed and controlled, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a
manner that can ignite nearby materials. Highly publicized incidents of laptop computers and cell phones bursting into flames have focused consumer attention on the safety of these cells. These events
also have raised questions about the suitability of these lithium-ion cells for automotive applications. There can be no assurance that a field failure of our battery packs will not occur,
which could damage the vehicle or lead to personal injury or death and may subject us to lawsuits. Furthermore, there is some risk of electrocution if individuals who attempt to repair battery packs
on our vehicles do not follow applicable maintenance and repair protocols. Any such damage or injury would likely lead to adverse publicity and potentially a safety recall. Any such adverse publicity
could adversely affect our business, prospects, financial condition and operating results. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> We may become subject to product liability claims, which could adversely affect our financial condition and liquidity if we are not able to successfully defend or insure
against such claims.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we have not been subject to any product liability claims to date, we could become subject to such claims in the future, which
could harm our business, prospects, financial condition and operating results. The motor vehicle industry experiences significant product liability claims and we face inherent risk of exposure to
claims in the event our vehicles do not perform as expected or malfunction and personal injury or death results. Our risks in this area are particularly pronounced given the limited field experience
of our commercial electric vehicles and vehicle technologies. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim
could generate substantial negative publicity about our commercial electric vehicles and business, which could have an adverse impact on our brand, business, prospects and operating results. We
maintain product liability insurance for all of our vehicles with annual limits of $6.0&nbsp;million on a claims made basis, but there is no assurance that our insurance will be sufficient to cover
all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of our coverage, or outside of our coverage, may have an adverse effect on our reputation,
business and financial condition. We may not be able to secure additional product liability insurance coverage on commercially acceptable terms or at reasonable costs when needed, particularly if we
do face liability for our vehicles and are forced to make a claim under our policy. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our business may be adversely affected by union activities.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None of our full-time U.S. employees currently are represented by a labor union, while approximately 17% of our full-time U.K.
employees are represented by a labor union. Many manufacturers in the U.S. motor vehicle industry employ unionized workforces, which can result in higher employee costs and increased risk of work
stoppages. As we expand our business, there can be no assurances that our employees will not join or form&nbsp;a labor union, more of our U.K. employees will not join our existing labor union or
that we will not be required to become a union signatory. We also are directly or indirectly dependent upon companies with unionized work forces, such as parts suppliers and trucking and freight
companies, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial condition or operating results. If a work stoppage occurs, whether at
one of our facilities or a supplier's facility, it could delay the production and sale of our commercial electric vehicles and have an adverse effect on our business, prospects, financial condition
and operating results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our facilities could be damaged or adversely affected as a result of disasters or other unpredictable events. Any prolonged disruption in the operations of our facilities
would adversely affect our business, prospects, financial condition and operating results.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We assemble our electric vehicles in facilities located in Kansas City, Missouri and outside of Newcastle, England. Any prolonged
disruption in the operations of our
production facilities, whether due to technical or labor difficulties, disruptions in our information systems or communications network, accidents, weather conditions, terrorist activity, natural
disaster or otherwise, whether short- or long- term, would adversely affect our business, prospects, financial condition and operating results. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> RISKS RELATED TO THIS OFFERING AND OWNERSHIP OF OUR COMMON STOCK  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our
operating results.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company,
including costs associated with public company reporting and corporate governance requirements. These requirements include compliance with Section&nbsp;404 and other </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>provisions
of the Sarbanes-Oxley Act, as well as SEC and Nasdaq rules. Additionally, our management team will have to adapt to operating a public company. If these requirements divert our management's
attention from other business concerns, they could have an adverse effect on our business, prospects, financial condition and operating results. We expect complying with these rules and regulations
will substantially increase our legal and financial compliance costs and make some activities more time-consuming and costly. We currently are unable to estimate these costs with any
degree of certainty. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also expect that it may be more difficult and more expensive for us as a public company to obtain director and officer liability insurance, and we may be required to accept reduced
policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve
on our board of directors or as our executive officers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> An active, liquid and orderly trading market for our common stock may not develop, and you may not be able to resell your shares at or above the initial public offering
price.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to this offering, there has been no public market for shares of our common stock. The initial public offering price of our common
stock will be determined through negotiation with the underwriters, but this price may not necessarily reflect the price at which investors in the market will be willing to buy and sell shares of our
common stock following this offering. In the absence of an active trading market for our common stock, investors may not be able to sell their shares of our common stock at or above the initial
offering price or at the time they would like to sell. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our stock price may be volatile, and the market price of our common stock after this offering may drop below the price you pay.  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market price of our common stock could be subject to significant fluctuations after this offering, and it may decline below the
initial public offering price. Market prices for securities of early stage companies have historically been particularly volatile. As a result of this volatility, you may not be able to sell your
common stock at or above the initial public offering price. Some of the factors that may cause the market price of our common stock to fluctuate include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to
us;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>fluctuations in our recorded revenue, even during periods of significant sales order activity;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>changes in estimates of our financial results or recommendations by securities analysts;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>failure of any of our vehicles to achieve or maintain market acceptance;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>product liability issues involving our vehicles or our competitors' vehicles;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>changes in market valuations of similar companies;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>success of competitive vehicles or vehicle technologies;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>changes in our capital structure, such as future issuances of securities or the incurrence of debt; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>announcements by us or our competitors of significant services, contracts, acquisitions or strategic alliances; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>regulatory developments in the United States, foreign countries or both;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>litigation involving us, our general industry or both;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>additions or departures of key personnel; </FONT></DD></DL>
</UL>
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<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>investors' general perception of us; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>changes in general economic, industry and market conditions. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, if the market for electric vehicle or alternative energy stocks or the stock market in general experiences a loss of investor confidence, the trading price of our common
stock could decline for reasons unrelated to our business, financial condition or operating results. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to class
action lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Tanfield beneficially owns a significant amount of our common stock, which may depress the trading price of our common stock or prevent new investors from influencing
significant corporate decisions.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon completion of this offering, Tanfield will beneficially own approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our outstanding shares of common
stock, assuming the underwriters do not exercise their over-allotment option, and approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our outstanding shares of common stock, if the underwriters'
over-allotment option is exercised in full. Tanfield's ownership percentage may adversely affect the trading price of our common stock because investors often perceive disadvantages in
owning stock in companies that have a significant ownership concentration in a single stockholder or group of stockholders. As a result of its ownership concentration, Tanfield will be able to
significantly influence the outcome of all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant
corporate transactions. Tanfield's exercise of this influence could have the effect of delaying or preventing a change of control of us or changes in directors or management and will make the approval
of certain transactions difficult or impossible without Tanfield's support. Tanfield may sell a portion of its shares in this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> A total of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, or&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%, of the total outstanding shares of our common stock after the offering are restricted from
immediate resale, but may be sold
in the public markets in the near future. The large number of shares eligible for public sale or subject to rights requiring us to register them for public sale could depress the market price of our
common stock.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market
after this offering, and the perception that these sales could occur also may depress the market price of our common stock. We will have&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
shares of common stock outstanding after this offering, assuming the underwriters do not exercise their over-allotment option, and&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock
outstanding after
this offering, assuming the underwriters exercise their over-allotment option in full. Of these shares, the common stock sold in this offering will be freely tradable in the United States,
except for any shares purchased by our "affiliates," as defined in Rule&nbsp;144 under the Securities Act of 1933. The holders of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our outstanding
common stock have agreed
with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock during the 180-day period (and with respect to Tanfield, which holds
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our outstanding common stock, the 365-day period) beginning on the date of this prospectus, except with the prior written consent each of UBS
Securities&nbsp;LLC and Merrill Lynch, Pierce, Fenner&nbsp;&amp; Smith Incorporated. After the expiration of the 180-day (or, with respect to Tanfield, 365-day) restricted
period, these shares may be sold in the public market in the United States, subject to prior registration in the United States, if required, or reliance upon an exemption from U.S. registration,
including, in the case of shares held by affiliates or control persons, compliance with the volume restrictions of Rule&nbsp;144. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the lock-up period discussed above, following the six-month anniversary of the closing of this offering (or with respect to Tanfield, following the
12-month anniversary of the closing of this offering), and after giving effect to the automatic exercise, on a net exercise basis, of the 2011 warrants upon the pricing of this offering,
conversion of our Series&nbsp;B preferred stock and Series&nbsp;C preferred into </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>38</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>common
stock immediately prior to the closing of this offering and
the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock split of our outstanding common stock effected on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
stockholders owning
an aggregate of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares, or&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares, including shares held by
Tanfield, will have rights, subject to certain conditions, to require us to file registration statements
with the SEC covering their shares and to include their shares in registration statements that we may file on our own behalf or on behalf of other of our stockholders. In addition, we intend to
file&nbsp;a registration statement to register the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock previously issued or reserved for future issuance under our equity
compensation plans and agreements.
Upon effectiveness of that registration statement, subject to the satisfaction of applicable exercise periods and lock-up agreements with the representatives of the underwriters referred
to above,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock issued upon exercise of our outstanding stock options will be available for resale in the United States in the open
market. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
of our common stock as restrictions end or pursuant to registration rights may make it more difficult for us to sell equity securities in the future at a time and at a price that
we deem appropriate. These sales also could cause our stock price to fall and make it more difficult for you to sell shares of our common stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Anti-takeover provisions contained in our certificate of incorporation and by-laws and provisions of Delaware law, as well as our stockholder rights
plan, could deter a change in control of us.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our certificate of incorporation and by-laws, which will be in effect immediately following this offering, Delaware law and
our stockholder rights plan contain provisions which could have the effect of rendering more difficult, delaying or preventing an acquisition of us deemed undesirable by our board of directors. Our
corporate governance documents include provisions: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>creating a classified board of directors whose members serve staggered three-year terms; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>providing that our directors may be removed by stockholders only for cause;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>authorizing "blank check" preferred stock, which could be issued by our board without stockholder approval and may contain
voting, liquidation, dividend and other rights superior to those of our common stock;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>limiting the liability of, and providing indemnification to, our directors and officers;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>limiting the ability of our stockholders to call and bring business before special meetings and to take action by written
consent in lieu of a meeting;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for
nominations of candidates for election to our board of directors;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>controlling the procedures for the conduct and scheduling of board and stockholder meetings;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>providing the board of directors with the express power to postpone previously scheduled annual meetings and to cancel
previously scheduled special meetings; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>requiring the affirmative vote of 75% of our capital stock entitled to vote generally in the election of directors to
amend certain of the provisions described above. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
provisions, alone or together, could delay or prevent hostile takeovers and changes in control of us or changes in our management. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
board of directors also has adopted a stockholder rights plan, which will become effective upon the closing of this offering and which could have the effect of discouraging third
parties from attempting to acquire us without the prior approval of our board. See "Description of Capital Stock&#151;Anti-Takeover Considerations&#151;Stockholder rights
plan" for more information about our stockholder rights plan. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>39</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a Delaware corporation, we are subject to Section&nbsp;203 of the Delaware General Corporation Law, which prevents some stockholders holding more than 15% of our outstanding common
stock from engaging in certain business combinations with us without approval of the holders of substantially all of our outstanding common stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
provision of our certificate of incorporation or by-laws, Delaware law or our stockholder rights plan that has the effect of delaying or deterring a change in control of
us could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common
stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our
outstanding common stock immediately after this offering. Therefore, if you purchase our common stock in this offering, you will incur immediate dilution of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in net tangible book
value
per share from the price you paid. Additionally, following this offering, purchasers in this offering will have contributed&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of the total consideration paid by our stockholders to
purchase shares of common stock, in exchange for acquiring approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our total outstanding shares as of June&nbsp;30, 2011, after giving effect to this offering, the automatic
exercise, on a net exercise basis, of the 2011 warrants upon the pricing of this offering, the conversion immediately prior to the closing of this offering of all of the outstanding shares of our
Series&nbsp;B preferred stock and Series&nbsp;C preferred stock and the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock split of our outstanding
common stock effected on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. Any exercise of
outstanding stock options and/or conversion of Series&nbsp;A debentures into shares of common stock will result in further dilution. See "Dilution" for a further description of the dilution that
purchasers in this offering will experience immediately after this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> The terms of any indebtedness we incur and any preferred securities that we issue could adversely affect our common stockholders.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We anticipate that in the future we will enter into credit facilities and incur other indebtedness the terms of which may limit our
ability to pay dividends on our common stock. Furthermore, our certificate of incorporation provides our board of directors with the ability to issue up to 5,000,000 shares of preferred stock having
rights and preferences determined by our board at the time such preferred stock is issued. Holders of any such preferred stock could rank senior to our common stockholders with respect to the
distribution of our assets upon any liquidation of us and the receipt of dividends. Any debt or preferred equity securities that we may issue in the future also may be convertible into shares of our
common stock, which would dilute the ownership interests of our common stockholders, perhaps materially. If we were to enter into any such debt facilities or issue any such debt or preferred
securities, the rights of our common stockholders may be adversely affected. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they downgrade their recommendations
regarding our stock, our stock price and trading volume could decline.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish
about us, our business, our market or our competitors. If any of the analysts who may cover us downgrade their recommendation regarding our stock, or provide more favorable relative recommendations
about our competitors, our stock price likely would decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports about us, we could lose
visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>40</FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2><B><I> Our management will have broad discretion over the use of the proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your
investment.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management will have broad discretion over the use of our net proceeds from this offering and you will be relying on the judgment
of our management regarding the application of these proceeds. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. We expect to use
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million of the net proceeds to us from this offering to redeem $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million in principal amount
of our outstanding Series&nbsp;A debentures. We expect the
remainder of the net proceeds to us of this offering to be used for general corporate purposes, including working capital and capital expenditures, which may include the opening of our sales, service
and assembly facilities and investments in, or acquisitions of, complementary businesses, services or technologies. Our management's investment of these net proceeds may not yield a significant, or
any, return. You will not have the opportunity to influence our decisions on how to use our net proceeds from this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> After the completion of this offering, we do not expect to declare any cash dividends in the foreseeable future.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After the completion of this offering, we do not anticipate declaring any cash dividends to holders of our common stock in the
foreseeable future. Consequently, investors may need to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their
investment. Investors seeking cash dividends should not purchase our common stock. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>41</FONT></P>

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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="dg78101_forward-looking_statements"> </A>
<A NAME="toc_dg78101_1"> </A>
<BR></FONT><FONT SIZE=2><B>  FORWARD-LOOKING STATEMENTS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus contains forward-looking statements. Forward-looking statements include all statements that are not historical facts,
including, without limitation, statements regarding our future financial position, prospects, business strategy, budgets, pending acquisitions, recent acquisitions and divestitures, project costs and
plans and objectives for future operations, and statements pertaining to future development activities and costs. The words "estimate," "project," "predict," "contemplate," "continue," "believe,"
"expect," "anticipate," "potential," "could," "may," "foresee," "plan," "goal," "will," "should" and "intend" and similar expressions will generally identify forward-looking statements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
statements involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially
from those expressed or implied by these forward-looking statements. Such forward-looking statements are based on assumptions and beliefs that we believe to be reasonable; however, assumed facts
almost always vary from actual results, and the differences between assumed facts and actual results can be material, depending upon the circumstances. We cannot assure you that the stated expectation
or belief will occur or be achieved or accomplished. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
forward-looking statements are expressly qualified by these cautionary statements and any other cautionary statements that may accompany those statements. Because forward-looking
statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as guarantees of future events.
With this in mind, you should carefully consider the risks discussed in the "Risk Factors" section of this prospectus and other disclosures about us that are included in this prospectus. The
forward-looking statements in this prospectus represent our views only as of the date of this prospectus, and we undertake no obligation to update or revise any forward-looking statements to reflect
events or circumstances after the date of this prospectus. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>42</FONT></P>

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<BR></FONT><FONT SIZE=2><B>  USE OF PROCEEDS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate that the net proceeds to us from this offering will be approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and the net proceeds to the selling
stockholders will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, based on an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share (the mid-point of the price range set forth on the
cover page of this prospectus), after deducting underwriting discounts and commissions and estimated offering expenses. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
will not receive any proceeds from the sale of shares of common stock by the selling stockholders, including any shares of common stock sold by the selling stockholders in connection
with the underwriters' exercise of their over-allotment option, although we will bear the costs, other than underwriting discounts and commissions, associated with the sale of these
shares. The selling stockholders include certain of our executive officers and members of our board of directors and entities affiliated with or controlled by them. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
intend to use $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million of the net proceeds to us from this offering to redeem $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million in principal amount of our outstanding
Series&nbsp;A debentures. The Series&nbsp;A debentures bear interest at 10% per annum and mature at various dates in 2014. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
intend to use the remainder of the net proceeds to us from this offering for capital expenditures, working capital and other general corporate purposes, including the continued
development of our technology and establishment of our sales, service and assembly facilities. Such uses may include the continuous development of our Smith Power, Smith Drive and Smith Link
technologies, the expansion
of our research and development facilities, including for battery testing and powertrain, gearbox and telemetry development, and the development of our current and anticipated vehicle platforms. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some
of the other principal purposes of this offering are to create a public market for our common stock, increase our visibility in the marketplace and provide liquidity to existing
stockholders. A public market for our common stock will facilitate future access to public equity markets and enhance our ability to use our common stock as a means of attracting and retaining key
employees and as consideration for strategic transactions. Depending on the future demand for our vehicles and the pace at which we expand our production, sales and service capacity, we may seek to
raise additional capital to fund our expansion. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>43</FONT></P>

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<BR></FONT><FONT SIZE=2><B>  DIVIDEND POLICY    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have never declared or paid any cash dividends on our capital stock and do not expect to pay any cash dividends for the foreseeable
future. We intend to use future earnings, if any, in the operation and expansion of our business. Payment of future cash dividends, if any, will be at the discretion of our board of directors and
subject to compliance with applicable law, and will depend on our financial condition, recent and expected operating results, capital requirements, general business conditions, restrictions imposed by
lenders, if any, and such other factors our board of directors may deem relevant. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>44</FONT></P>

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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
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<A NAME="toc_di78101_1"> </A>
<BR></FONT><FONT SIZE=2><B>  CAPITALIZATION    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our cash and cash equivalents and our capitalization as of June&nbsp;30,
2011: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>on an actual basis; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>on a pro forma basis to reflect: </FONT> <FONT SIZE=2>
<BR><BR></FONT>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the filing of our certificate of incorporation;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the conversion of all of our outstanding shares of Series&nbsp;B preferred stock into 4,809,007 shares of our common
stock, based on the one-to-one conversion ratio in effect as of June&nbsp;30, 2011; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock split of our outstanding common stock effected
on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD></DL>
</DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>on a pro forma, as adjusted basis to reflect the pro forma adjustments described above, our receipt of the estimated net
proceeds to us from this offering, based on an assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share (the mid-point of the price range set forth on the cover page of this
prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, and our use of such net proceeds to us as described in "Use of
Proceeds." </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
pro forma and pro forma, as adjusted information below is illustrative only and our capitalization following the completion of this offering will be adjusted based on the actual
initial public offering price and other terms of this offering determined at pricing. You should read this table together with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and our financial statements and the accompanying notes appearing elsewhere in this prospectus. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="47pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="54pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>As of June&nbsp;30, 2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Actual </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Pro forma </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Pro forma,<BR>
as adjusted </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(unaudited)<BR>
(in thousands, except share<BR>
and per share data)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,227</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Note payable&#151;Tanfield</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,750</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;A debentures, net of discount</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,031</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;B convertible redeemable preferred stock, $0.001 par value per share; 6,600,000 shares authorized, 4,809,007 shares issued and outstanding,
actual; no shares authorized, no shares issued and outstanding, pro forma and pro forma, as adjusted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>56,688</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Stockholders' deficit:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock, $0.001 par value per share; 20,000,000 shares authorized, 10,507,929 issued and outstanding, actual; 200,000,000 shares authorized,
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares issued and outstanding, pro&nbsp;forma; and 200,000,000 shares authorized,
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares issued and outstanding, pro&nbsp;forma, as adjusted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Preferred stock, $0.001 par value per share; no shares authorized, issued and outstanding, actual; 5,000,000 shares authorized, no shares issued and
outstanding, pro forma and pro forma, as adjusted</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,997</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock warrant</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>23</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accumulated other comprehensive loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,540</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accumulated deficit</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(74,183</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total stockholders' (deficit) equity</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(73,692</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total capitalization</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>777</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>45</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=52,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=376059,FOLIO='45',FILE='DISK126:[11ZDO1.11ZDO78101]DI78101A.;14',USER='JMCGUAN',CD=';8-NOV-2011;22:51' -->
<A NAME="page_di78101_1_46"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each $1.00 increase or decrease in the assumed initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share (the mid-point of the
price
range set forth on the cover page of this prospectus) would increase or decrease, as applicable, our pro forma, as adjusted cash and cash equivalents, additional paid-in capital and
stockholders' equity by approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after
deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
pro forma column and the pro forma, as adjusted column in the table above do not include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>714,688 shares of our common stock issuable upon the exercise of options outstanding as of June&nbsp;30, 2011 at a
weighted average exercise price of $7.98 per share;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>938,000 shares of our common stock issuable upon the exercise of options issued after June&nbsp;30, 2011 at a weighted
average exercise price of $12.33 per share;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock issuable upon conversion of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in principal amount of our
outstanding Series&nbsp;A debentures at an assumed conversion price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, which is 80% of the mid-point of the price range listed on the cover page of this prospectus; </FONT>
<FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>726,960 shares of our common stock issuable upon the exercise, on a net exercise basis, of the 2011 warrants at a weighted
average exercise price of $12.38 per share;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the issuance in November 2011 of shares of our Series&nbsp;C preferred stock and the conversion of such shares into
2,431,170 shares of our common stock, based on a one-to-one conversion ratio; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>3,000,000 shares of our common stock reserved for future issuance under our 2012 Incentive Plan, which will become
effective in connection with the consummation of this offering. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>46</FONT></P>

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<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_di78101_1_47"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="di78101_dilution"> </A>
<A NAME="toc_di78101_2"> </A>
<BR></FONT><FONT SIZE=2><B>  DILUTION    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference
between the initial public offering price per
share and the net tangible book value per share of our common stock after this offering. Our pro forma net tangible book value as of June&nbsp;30, 2011 was $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share of our common stock. Pro forma net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the total
number
of shares of our common stock outstanding, after giving effect to the automatic conversion of all of the outstanding shares of our Series&nbsp;B preferred stock into common stock immediately prior
to the closing of this offering and the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock split of our outstanding common stock effected
on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After
giving effect to the sale by us of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock in this offering at an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is
the mid-point of the price range listed on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our
pro forma net tangible book value as of June&nbsp;30, 2011 would have been approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, or $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share of our
common stock. This amount represents an
immediate increase in our pro forma net tangible book value of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share to our existing stockholders and an immediate dilution in our pro forma net tangible book value of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share to new investors purchasing shares of our common stock in this offering at the initial public offering price. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table illustrates this dilution on a per share basis: </FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Assumed initial public offering price per share</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma net tangible book value per share as of June&nbsp;30, 2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Increase per share attributable to this offering</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma net tangible book value per share after this offering</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Dilution per share to new investors</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the bottom of the price range listed on the cover page of this prospectus, would decrease our pro forma net
tangible book value per share after this offering by approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and would decrease dilution per share to new investors by approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, assuming that the number
of shares offered by us, as listed on the cover page of this prospectus, remains the same. Additionally, to the extent any outstanding options are exercised, new investors will experience further
dilution. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An
initial public offering price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the top of the price range listed on the cover page of this prospectus, would increase our pro forma net tangible
book value per share after this offering by approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and would increase dilution per share to new investors by approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, assuming that the number of shares
offered by us, as listed on the cover page of this prospectus, remains the same. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
the underwriters exercise their over-allotment option in full, the pro forma net tangible book value per share after this offering will increase to $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share, representing an immediate increase to existing stockholders of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share and an immediate dilution of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share to new investors. If any shares are issued upon
exercise of outstanding options, you will experience further dilution. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table summarizes, as of June&nbsp;30, 2011, the number of shares purchased or to be purchased from us, the total consideration paid or to be paid to us, and the average
price per share paid or to be paid to us by existing stockholders and new investors purchasing shares of our common stock in this offering at an assumed initial public offering price of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, which is the </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>47</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_di78101_1_48"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>mid-point
of the price range listed on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
As the table below shows, new investors purchasing shares of our common stock in this offering will pay an average price per share substantially higher than our existing stockholders paid. </FONT></P>
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<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="40pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="37pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="37pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="64pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares Purchased </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total Consideration </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Average Price<BR>
Per Share </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Percent </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Amount </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Percent </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Existing stockholders</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>New investors</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
percentage of shares purchased from us by existing stockholders is based on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock outstanding as of June&nbsp;30, 2011,
after giving effect to
the automatic conversion of all of the outstanding shares of our Series&nbsp;B preferred stock into common stock immediately prior to the closing of this offering and the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock split of our outstanding common stock effected on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. This number
excludes: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>714,688 shares of our common stock issuable upon the exercise of options outstanding as of June&nbsp;30, 2011 at a
weighted average exercise price of $7.98 per share;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>938,000 shares of our common stock issuable upon the exercise of options issued after June&nbsp;30, 2011 at a weighted
average exercise price of $12.33 per share;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock issuable upon conversion of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in principal amount of our
outstanding Series&nbsp;A debentures at an assumed conversion price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, which is 80% of the mid-point of the price range listed on the cover page of this prospectus; </FONT>
<FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>726,960 shares of our common stock issuable upon the exercise, on a net exercise basis, of the 2011 warrants at a weighted
average exercise price of $12.38 per share; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the issuance in November 2011 of shares of our Series&nbsp;C preferred stock and the conversion of such shares into
2,431,170 shares of our common stock, based on a one-to-one conversion ratio; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>3,000,000 shares of our common stock reserved for future issuance under our 2012 Incentive Plan, which will become
effective in connection with the consummation of this offering. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
all of our Series&nbsp;A debentures had been converted to shares of common stock (using the if-converted method), assuming a conversion price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, which
is 80% of the mid-point of the price range listed on the cover page of this prospectus, and all of our outstanding stock options had been exercised (using the treasury stock method), in
each case, as of June&nbsp;30, 2011, our pro forma net tangible book value as of June&nbsp;30, 2011 would have been approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million, or
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share of
our common stock, and the pro forma net tangible book value after giving effect to this offering would have been $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share, representing dilution in our pro forma net tangible
book
value per share to new investors of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
sale of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common stock to be sold by the selling stockholders in this offering will reduce the number of shares of our common stock
held by existing
stockholders to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, or&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of the total shares outstanding, and will increase the number of shares
of our common stock held by new investors to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, or
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of the total shares outstanding. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>48</FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="dk78101_selected_historical_financial_data"> </A>
<A NAME="toc_dk78101_1"> </A>
<BR></FONT><FONT SIZE=2><B>  SELECTED HISTORICAL FINANCIAL DATA    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following selected historical financial data should be read together with our financial statements and the accompanying notes
appearing elsewhere in this prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The selected historical financial data in this section is not
intended to replace our historical financial statements and the accompanying notes. Our historical results are not necessarily indicative of our future results. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
derived the statement of operations data for 2008, 2009 and 2010 and the balance sheet data as of December&nbsp;31, 2009 and 2010 from our audited financial statements appearing
elsewhere in this prospectus. The statement of operations data for the six months ended June&nbsp;30, 2010 and 2011 and the balance sheet data as of June&nbsp;30, 2011 are derived from our
unaudited interim financial statements appearing elsewhere in this prospectus. The balance sheet data as of December&nbsp;31, 2008 is unaudited and has been derived from accounting records of
Tanfield that are not included elsewhere in this prospectus. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the
opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly our financial position as of June&nbsp;30, 2011 and results of operations
for the six months ended June&nbsp;30, 2010 and 2011. Operating results for
the six months ended June&nbsp;30, 2011 are not necessarily indicative of the results that may be expected for the year ending December&nbsp;31, 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
completed the acquisition of Smith UK on January&nbsp;1, 2011. As a result of the conclusion that Smith and Smith UK were under common control for the historical periods, their
results have been combined for the 2009 and 2010 periods. All results subsequent to the acquisition on January&nbsp;1, 2011 have been consolidated. The balance sheet data with respect to Smith UK as
of December&nbsp;31, 2008, 2009 and 2010 and the statement of operations data for the periods then ended have been derived from Tanfield's accounting records as of and for such periods. Our
historical combined financial statements may not reflect what our financial position, results of operations and cash flows would have been had we operated as a separate, standalone company without the
shared resources of Tanfield in the predecessor periods. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
selected historical financial data as of and for Smith UK's fiscal years ended December&nbsp;31, 2007 and 2006 has been omitted because it is not available without the expenditure
of unreasonable effort and expense. A combination of factors results in our inability to provide the 2007 and 2006 selected balance sheet and statement of operations information without unreasonable
effort and expense. These factors include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Smith UK was part of Tanfield prior to January 2011;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Tanfield did not prepare stand-alone financial statements for Smith UK for the years ended December&nbsp;31, 2007 and
2006 and there was no requirement to complete such as part of the sale to us;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Tanfield did not prepare separate trial balances and related entries for Smith UK for the years ended December&nbsp;31,
2007 and 2006, which would be required in order to prepare financial statements for Smith UK from which selected financial data could be derived for those years;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Tanfield's 2007 and 2006 financial information was prepared to comply with International Financial Reporting Standards
rather than GAAP;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>due to the conversion to new accounting systems during 2007 and 2008, information to support the development of GAAP basis
financial information, as well as supplemental information required to make informed judgments related to accounting estimates, for 2006 and 2007, is not available without unreasonable effort and
expense; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>49</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_dk78101_1_50"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>we are not in a position to independently ascertain whether the information necessary to calculate the
carve-out financial information continues to be available from Tanfield and Tanfield is under no obligation to provide us with such information; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>we believe the omission of the 2007 and 2006 selected financial data does not have a material impact on the understanding
of our results of operations, financial condition, liquidity and operating trends. </FONT></DD></DL>
</UL>
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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TH COLSPAN=4 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Years ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Six Months ended<BR>
June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands, except share and per share amounts)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Combined and Consolidated Statement of Operations Data:</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Revenue</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vehicle(1)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>23,827</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,223</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>14,166</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>31,930</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,633</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Service and repairs(2)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,767</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>14,631</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>18,208</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,672</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,191</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total revenue</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>35,594</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>22,854</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>32,374</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>37,602</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,824</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cost of revenue</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vehicle</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>33,117</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>13,370</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>21,671</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>40,035</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12,335</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Service and repairs</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12,175</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>14,421</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>18,124</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,945</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,165</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total cost of revenue</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>45,292</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>27,791</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>39,795</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>45,980</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>18,500</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Gross loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,698</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(4,937</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,421</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,378</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,676</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development expense</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,550</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,126</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,478</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,457</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>830</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Selling, general and administrative</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>13,307</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,697</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,411</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,031</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,360</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>15,857</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11,823</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>14,889</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,488</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,190</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
(25,555</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
(16,760</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
(22,310</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
(16,866</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
(7,866</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other expense (income)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,699</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>696</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,881</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,225</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Government grant reimbursements</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(688</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(18</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(205</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(315</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Loss on extinguishment of debt</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>971</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other expense, net</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,698</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>60</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,763</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>745</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(30,264</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(17,498</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(22,310</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(21,276</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,521</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss per share of common stock, basic and diluted(3)(4)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2.95</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1.89</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>N/A</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2.05</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(0.94</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares used in computing net loss per share of common stock, basic and diluted(3)(4)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,258</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,271</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>N/A</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,381</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,133</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Pro forma net loss per share of common stock, basic and diluted(3)(5)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Shares used in computing pro forma net loss per share of common stock, basic and diluted(3)(5)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
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 </DIV>
<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
 <!-- COMMAND=ADD_LINERULETXT,NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="26%" ALIGN="LEFT" -->
<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="26%" ALIGN="LEFT" >


<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Vehicle
revenue consists of revenues derived primarily from the sale of our Newton and Edison vehicles. Vehicle revenue also includes payments received by
us in connection with Smith Europe's, and previously Smith UK's, distribution of forklifts. </FONT></DD></DL>
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>50</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=57,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=881693,FOLIO='50',FILE='DISK126:[11ZDO1.11ZDO78101]DK78101A.;19',USER='FSTREET',CD=';9-NOV-2011;18:39' -->
<A NAME="page_dk78101_1_51"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>
 <DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
<p style="font-family:times;"></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Service
and repairs revenue consists of revenues derived from the provision of fleet maintenance and repair services. These services, which are primarily
provided in the United Kingdom, include services for traditional diesel-fueled vehicles as well as for electric vehicles.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Our
basic net loss per share of common stock is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for
the period. The diluted net loss per share of common stock is computed by dividing the net loss by the weighted-average number of shares of common stock and, if dilutive, potential shares of common
stock outstanding during the period. Potential shares of common stock consist of stock options and warrants to purchase shares of our common stock (using the treasury stock method) and the conversion
of our Series&nbsp;B preferred stock, 12% senior unsecured convertible promissory bridge notes and Series&nbsp;A debentures (using the if-converted method). As we generated a loss in
each period, the potential shares of common stock would have reduced our per share loss (antidilutive) and, therefore, were excluded from the calculation.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Smith
Electric Vehicles Corp. was not incorporated until January 2009. Smith&nbsp;UK, the predecessor entity, was, in part, a division of Tanfield and, in
part, a wholly-owned subsidiary of Tanfield and did not have separately issued stock. As a result, we are unable to calculate loss per share of common stock for the year ended December&nbsp;31,
2008. See Note&nbsp;1, "Nature of Business and Presentation" to the combined and consolidated financial statements included elsewhere in this prospectus for information regarding our acquisition of
Smith UK.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Pro
forma net loss per share of common stock, basic and diluted includes shares of common stock issuable upon the automatic conversion of all of the
outstanding shares of our Series&nbsp;B preferred stock into shares of our common stock, at a one-to-one conversion ratio, immediately prior to the closing of this offering,
and the&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;for&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;stock split of our outstanding common stock effected
on&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></DD></DL>
 </DIV>

 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30,<BR>
2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(in thousands)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Combined and Consolidated Balance Sheet Data:</B></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,183</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>280</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,227</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Property, plant and equipment, net</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,611</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,912</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,501</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,747</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Working (deficit) capital</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(29,304</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(548</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,550</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2,918</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>30,323</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>16,334</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>11,804</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>38,394</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bridge notes, net of discount</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13,055</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bridge note detachable warrants</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,039</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Note payable&#151;Tanfield</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,750</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;A debentures, net of discount</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>9,859</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8,930</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10,031</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;A conversion option</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,612</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,340</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,052</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;B convertible redeemable preferred stock</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>56,688</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock warrant</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>23</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>37</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>23</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total stockholders' equity (deficit)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(42,431</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(12,621</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,523</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(73,692</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>51</FONT></P>

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<!-- ZEQ.=3,SEQ=58,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=631878,FOLIO='51',FILE='DISK126:[11ZDO1.11ZDO78101]DK78101A.;19',USER='FSTREET',CD=';9-NOV-2011;18:39' -->
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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="dm78101_management_s_discussion_and_an__man03466"> </A>
<A NAME="toc_dm78101_1"> </A>
<BR></FONT><FONT SIZE=2><B>  MANAGEMENT'S DISCUSSION AND ANALYSIS OF<BR>  FINANCIAL CONDITION AND RESULTS OF OPERATIONS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>The following discussion of our financial condition and results of operations should be read together with the
financial statements and related notes that are included elsewhere in this prospectus. This discussion contains forward-looking statements based upon current expectations that involve risks and
uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" or in
other parts of this prospectus.</I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OVERVIEW  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We design, produce, sell and service zero-emission commercial electric vehicles designed to be a superior performing
alternative to traditional diesel trucks due to higher efficiency and lower total cost of ownership. We believe we are the only vehicle
manufacturer selling to major commercial fleets in the United States and Europe that exclusively produces electric vehicles. We focus on the production and sale of commercial electric vehicles that
primarily address the needs of medium-duty commercial fleet operators with depot-based operations and predictable daily service routes of up to 120 miles. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
currently design, produce and sell two vehicle platforms, the Smith Newton and the Smith Edison, both of which can be configured for multiple applications. We sell the Smith Newton in
the United States, the United Kingdom and in selected international markets. We currently sell the Smith Edison in the United Kingdom and in selected international markets. We are developing and plan
to introduce in early 2012 a Newton model that is configured as a step van, and intend to introduce in mid-2012 a Newton that will have a GVW of approximately 33,000 pounds to meet the
needs of delivery and transit customers. We intend to continue to develop and introduce a next generation Smith Edison in mid-2012. Our planned future vehicle offerings will be based on our Newton and
Edison vehicle platforms and will utilize our Smith Drive, Smith Power and Smith Link technologies. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith
UK launched the Smith Newton in December 2006 and began U.K. production of the Newton in January 2007. Smith UK also launched and began U.K. production of the Smith Edison in 2007.
Smith Electric Vehicles Corp., or Smith US, was incorporated in Delaware on January&nbsp;13, 2009. We obtained our U.S. production facility in March 2009, began production in July 2009 and sold our
first Newton in the United States in December 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From
August&nbsp;5, 2009 through December&nbsp;31, 2010, Smith US held a license from Tanfield under which we had the exclusive right in North America to use the Smith brand and
Tanfield's zero-emission vehicle know-how and technology to develop, test, manufacture, market, distribute, sell and service electric vehicles. We acquired Smith UK effective
January&nbsp;1, 2011 and now own the Smith brand and the intellectual property rights we previously had licensed from Tanfield. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
corporate headquarters are located in Kansas City, Missouri and we have production, research and development, sales and service facilities in Kansas City, Missouri and outside of
Newcastle, England. Our two production facilities provide us with an aggregate of approximately 165,100 square feet of production space. Long term, we intend to expand our vehicle assembly operations
through a network of sales, service and assembly facilities, rather than significantly increasing the production capabilities of our existing facilities. We plan to open our sales, service and
assembly facilities in targeted urban areas in the United States and abroad, beginning with facilities on the east and west coasts of the United States. We expect to open the first of these facilities
in New York City in the first half of 2012. Once a sales, service and assembly facility is open in a geographic market, vehicle assembly for sales made in that geographic market generally would be
performed at that facility. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
recently completed the transition of the powertrain and battery system used in the U.S.-produced Smith Newton to our Smith Drive and Smith Power technologies. In order to facilitate
this </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>52</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>transition,
we temporarily suspended U.S. production of the Newton in August 2011 and re-tooled our Kansas City production facility. We began limited production of our second generation
Newton, which includes our Smith Drive, Smith Power and Smith Link technologies, in November 2011 and are in the process of ramping production and integrating new vendors into our supply chain. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a result of the transition to our next generation technologies and the accompanying suspension of U.S. production, we sold 21 vehicles in the U.S. during the third quarter of 2011,
compared with sales of 84 vehicles and 91 vehicles during the first and second quarters of 2011, respectively. Although the decline in sales resulted in a concurrent decline in material costs, our
other operating and administrative costs were stable or increasing. For example, to maintain our investment in training of our assembled workforce, we determined not to make reductions in our assembly
workforce during this period. We also continued to expand our research and development function to support future technology enhancements and build out our administrative workforce to position the
company for future growth. To manage cash, we worked with vendors to extend our payment terms and, as a result, our consolidated accounts payable increased between June&nbsp;30, 2011 and
October&nbsp;31, 2011. As a result of these activities, our consolidated cash position declined substantially from the $7.2&nbsp;million of cash at June&nbsp;30, 2011. To increase liquidity, we
issued $30.0&nbsp;million of 2011 convertible notes and warrants in October 2011 to increase our cash position. All of the 2011 convertible notes converted into Series&nbsp;C preferred stock in
November 2011. See "&#151;Liquidity and Capital Resources&#151;Cash flows&#151;Cash flows provided by financing activities" for additional information about our 2011 convertible
notes financing and our Series&nbsp;C preferred stock issuance. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith
US was a development stage enterprise from January&nbsp;13, 2009, the date of Smith US's inception, through September&nbsp;30, 2009. During this period, we devoted all of our
efforts to securing and establishing a new business, and our planned principal operations had not commenced. Smith US was no longer a development stage enterprise and first recognized revenues during
the fourth quarter of 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
operate on a fiscal year that ends on December&nbsp;31. As of and for the periods prior to December&nbsp;31, 2010, the financial statements of Smith UK and Smith US are presented
on a combined basis. As of and for periods subsequent to January&nbsp;1, 2011, the financial statements for Smith Europe and Smith US are presented on a consolidated basis. See Note&nbsp;1,
"Nature of Business and Presentation" to the combined and consolidated financial statements included elsewhere in this prospectus. Our combined results of operations, financial position and cash flows
may not be indicative of our future performance and do not necessarily reflect what our combined consolidated results of operations, financial position and cash flows would have been had we operated
as a separate, standalone entity without the shared resources of Tanfield during the periods presented. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
operate our business in two reportable segments: (i)&nbsp;Zero Emission Vehicles and (ii)&nbsp;Maintenance Services. See "&#151;Results of Operations" and Note&nbsp;16,
"Information about Segments and Geographic Areas" to the combined and consolidated financial statements included elsewhere in this prospectus for information about our segments. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> CONDITIONS IMPACTING OUR BUSINESS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the commercial electric vehicle industry is poised for growth due to governmental and popular support for companies
that purchase environmentally friendly vehicles, the current emphasis on reducing carbon emissions, the volatility of diesel fuel prices and the policy shift toward energy independence from fossil
fuels in the United States and Western Europe. Although these macro-level conditions are favorable and should drive adoption of commercial electric vehicles generally, and our vehicles specifically,
there are significant near-term challenges we are working to overcome related to introducing new technology products. We believe that the most significant of these challenges is the
limited and under-developed supply chain for many of the key components used in </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>commercial
electric vehicles, including motors, control electronics units and batteries. The current absence of a well-developed supply chain has led to reliability and quality issues and
high vehicle system and component costs, which results in high initial vehicle costs when compared to diesel powered trucks of comparable GVWs, all of which impact customer satisfaction and limit the
broader adoption of commercial electric vehicles. To meet these challenges, we recently transitioned our U.S.-produced vehicles, and in 2012 expect to transition our U.K.-produced vehicles, to our
Smith Drive and Smith Power technologies, which will allow us to control and expand our supply chain with a goal of enhancing vendor diversity, reliability and quality. In turn, this will enable us to
substantially reduce the cost of key components, and thereby reduce both our initial vehicle prices and our vehicle cost of revenue. Furthermore, we expect that our tighter control over product
quality will result in decreased service and repairs cost of revenue, as we will incur lower warranty and non-warranty service costs. Combined, these factors should result in enhanced
customer satisfaction, deeper and broader customer relationships and increased vehicle sales. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> KEY OPERATING METRICS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our management uses order backlog, production slots filled and inventory turns as key operating metrics in evaluating our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of October&nbsp;31, 2011 we have an order backlog of 120 vehicles. We include in our order backlog vehicles yet to be produced that are subject to binding purchase agreements or
written purchase orders we have received. Our order backlog excludes vehicles in inventory awaiting additional modifications or delivery to the end customer. Although the backlog of unfilled orders is
one of many indicators of market demand, other factors such as changes in production rates, internal and supplier available capacity, new vehicle introductions and competitive pricing actions may
affect point-in-time comparisons. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
generally manage our production schedule on a rolling six-month forward basis and allocate production slots based on our receipt of binding purchase agreements and
purchase orders as well as customers' ordering forecasts. Based on this planning, we have allocated nearly all of our estimated 540 production slots through July 2012, of which approximately 80%
reflects U.S. production. Our allocation of production slots based on customers' ordering forecasts does not represent a guarantee that those customers will place orders, that customers will not alter
their forecasted delivery dates when placing orders or that orders made will not be cancelled. Nevertheless, we believe that closely monitoring our projected production schedule allows us to better
manage our business, including our inventory levels. We expect that our number of available production slots will increase as we transition our supply chain, which will allow us to ramp our production
and increase our production capacity. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
inventory turnover days for the six months ended June&nbsp;30, 2011 was approximately 101&nbsp;days. We calculate inventory turnover as consolidated total revenue for the period
divided by average consolidated inventory for the period. We use consolidated total revenue as the numerator as we believe this is a more stable indicator than cost of revenue, which may include
period adjustments such as lower of cost or market charges and warranty expense. Average consolidated inventory for the period is calculated as the sum of beginning of period and end of period
inventories divided by two. Management believes that inventory turnover is a useful operating metric because it provides insight into our ability to effectively manage our supply chain, purchasing and
production planning. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> BASIS OF PRESENTATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Revenue  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue consists of vehicle revenue and service and repairs revenue. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> Vehicle revenue  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize vehicle revenue primarily from the sale of our Newton and Edison vehicles. For the six months ended June&nbsp;30, 2011,
vehicle revenue represented approximately 85% of total revenue, compared with 67%, 36% and 44% for 2010, 2009 and 2008, respectively. We anticipate that vehicle revenue as a percentage of total
revenue will continue to increase over the foreseeable future. For the year ended December&nbsp;31, 2010 and for the six months ended June&nbsp;30, 2011, four and two of our customers,
respectively, collectively accounted for approximately 40% and 62%, respectively, of our total revenue; 60% and 73%, respectively, of our vehicle revenue. Frito-Lay accounted for 66% of
our vehicle revenue for the six months ended June&nbsp;30, 2011. Staples,&nbsp;Inc., Frito-Lay and Sainsbury's accounted for 24%, 14% and 12%, respectively, of our vehicle revenue for
the year ended December&nbsp;30, 2010. Our vehicle sales strategy is focused on industry-leading companies and government entities that operate substantial, well-recognized,
medium-duty commercial vehicle fleets and that have the corporate or public commitment and resources to support and sustain the development of the commercial electric vehicle industry. As
such, and given the relationships we have established with our existing customers, we anticipate that a significant portion of our vehicle revenue will continue to come from a concentrated group of
customers for the foreseeable future. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith
UK previously sold and leased and Smith Europe also sells and leases forklifts to customers. During the six months ended June&nbsp;30, 2011 and the years ended
December&nbsp;31, 2010, 2009 and 2008, we recognized revenue related to the sale and lease of forklifts of approximately $0.8&nbsp;million, $1.9&nbsp;million, $2.7&nbsp;million, and
$3.3&nbsp;million, respectively. See Note&nbsp;2, "Summary of Significant Accounting Policies" to the combined and consolidated financial statements included elsewhere in this prospectus for a
description of our accounting policy related to these transactions. We anticipate that revenue related to the sale and lease of forklifts will continue to be stable or declining over the foreseeable
future. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Service and repairs revenue  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service and repairs revenue is derived from the provision of fleet maintenance and repair services. These services, which are primarily
provided in the United Kingdom, include services for traditional diesel-fueled vehicles as well as for electric vehicles. For the six months ended June&nbsp;30, 2011, service and repairs revenue
represented approximately 15% of total revenue, compared with 33%, 64% and 56% for 2010, 2009 and 2008, respectively. Although we anticipate that
we will grow our electric vehicle maintenance and repair services, we also anticipate that this growth will be slower than the growth in our vehicle sales and, accordingly, service and repairs revenue
will continue to decline as a percent of total revenue over the foreseeable future. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Cost of revenue  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenue consists of vehicle cost of revenue and service and repairs cost of revenue. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Vehicle cost of revenue  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vehicle cost of revenue includes direct material costs, labor costs, and manufacturing overhead. Vehicle cost of revenue also includes
estimated warranty expense and charges to write down the carrying value of our inventory when it exceeds its estimated net realizable value and to provide for obsolete and on-hand
inventory in excess of forecasted demand. We anticipate that our vehicle cost of revenue will increase as our vehicles sales increase and as we open our sales, service and assembly facilities.
However, we expect vehicle cost of revenue to decrease as a percentage of vehicle revenue as we complete our current cost down initiative and transition to our Smith Drive and Smith Power
technologies, which will result in increased component-, and decreased systems-, based purchasing. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> Service and repairs cost of revenue  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service and repairs cost of revenue includes replacement part costs, direct labor costs, and overhead that supports our service
activities. Service and repairs cost of revenue also includes charges to provide for obsolete and on-hand inventory in excess of forecasted use, and recognized depreciation expense related
to our forklift business. We anticipate that our service and repairs cost of revenue will increase as we expand our electric vehicle maintenance and repair services and open our sales, service and
assembly facilities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Research and development expense  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development expense consists primarily of costs for personnel, third-party contractors, materials and supplies related to
the development of new products and the enhancement of existing products. As of September&nbsp;30, 2011 we had 36 full-time employees engaged in research, development, design and
engineering. We expense all of our research and development costs as they are incurred. In the near term, we expect research and development expenses to increase in large part due to increased
personnel-related expenses, as we seek to hire additional employees, as well as contract-related expenses as we continue to invest in the development of our products. Reimbursements received from
government agencies for research and development expenditures are recorded separately as a component of other expense (income). We anticipate that our research and development expenses will continue
to increase in absolute dollars, primarily as a result of the continued development of our Smith Drive, Smith Power and Smith Link technologies, but, over time, will decrease as a percentage of
revenue. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Selling, general and administrative expense  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expenses consist primarily of personnel and facility costs related to our marketing, sales,
executive, finance, human resources, information technology and legal organizations, as well as litigation settlements and fees for professional and contract services. As of September&nbsp;30, 2011,
we had 37 full-time employees engaged in these functions. We expect general and administrative expenses to increase as we incur additional costs related to operating as a publicly-traded
company, including increased audit and legal fees, costs of compliance with securities, corporate governance and other regulations, investor relations expenses and higher insurance premiums,
particularly those related to director and officer insurance. We also expect to incur increased costs as we hire personnel and enhance our infrastructure to support the anticipated growth of our
business, including in connection with the opening of our sales, service and assembly facilities. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Interest expense  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense consists primarily of payable-in-kind interest related to convertible debt, the amortization
of deferred financing fees, and the amortization of debt discount recognized on issue of convertible debt. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Government grant reimbursements  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We receive reimbursements from government agencies for certain qualified research and development expenditures, primarily under the
DOE's EV Demonstration Project and the United Kingdom's national innovation agency programs sponsored by the U.K. Department for Business, Innovation and Skills. As these projects are limited in scope
and duration, we have determined the best presentation to assist users of our financial statements in understanding our financial results is to recognize these reimbursements as a component of other
expense (income) rather than as a reduction in research and development expense. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Other expense, net  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expense, net consists primarily of fair value adjustments to financial instruments we have issued. Our Series&nbsp;A debentures
and 12% senior unsecured convertible promissory bridge notes, which we refer to as our bridge notes, include identifiable and separable derivative financial instruments. These separable financial
instruments, consisting primarily of a conversion option, an acceleration option and warrants, are adjusted at each quarter- and year-end to fair value. The adjustment to record the change
in each instrument's fair value may result in a either a charge to expense or a credit to income. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Income tax provision  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to taxes in the United States and the United Kingdom. In the United States, we have incurred net losses since inception
and in the United Kingdom we have a history of operating losses. As a result, we do not currently pay tax in the jurisdictions in which we operate. Based on the available information, we concluded it
is more likely than not that our deferred tax assets will not be realized and, accordingly, we have recorded a full valuation allowance against all of our deferred tax assets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Impact of foreign currency translation on reported results  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The functional currency for Smith UK was and for Smith Europe is the British pound. Therefore, the results of Smith UK and Smith
Europe's operations are initially recorded in the British pound and, at the end of each period, are translated into U.S. dollars. The combined and consolidated operating results for all periods
presented are presented in U.S. dollars, which include the fluctuation of currency translation between the U.S. dollar and the British pound. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> CRITICAL ACCOUNTING POLICIES AND ESTIMATES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our results of operations and financial condition, as reflected in our combined and consolidated financial statements, have been
prepared in accordance with accounting principles generally accepted in the United States. As discussed in Note&nbsp;2, "Summary of Significant Accounting Policies" to our combined and consolidated
financial statements included elsewhere in this prospectus, the preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting periods. On an ongoing basis, our management evaluates its estimates and judgments. We consider our accounting policies related to revenue
recognition, allowance for doubtful accounts, inventory valuation, warranty and fair value of financial instruments to be our critical accounting policies. Our management bases its estimates and
judgments on relevant facts and 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. Our most critical accounting policies are described below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Revenue recognition  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize revenue from the sale of products and provision of services in accordance with SEC Staff Accounting Bulletin
No.&nbsp;104, </FONT><FONT SIZE=2><I>Revenue Recognition</I></FONT><FONT SIZE=2>. Accordingly, we recognize revenue when: (i)&nbsp;persuasive evidence of an arrangement exists;
(ii)&nbsp;delivery has occurred or services have been rendered and there are no uncertainties regarding customer acceptance; (iii)&nbsp;our price is fixed or determinable; and
(iv)&nbsp;collection is reasonably assured. In instances where customer acceptance is required, revenue is either recognized (a)&nbsp;upon shipment when we are able to demonstrate that the
customer specific objective criteria have been met or (b)&nbsp;upon the earlier of customer acceptance or </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>expiration
of the acceptance period. Payments received in advance of work performed are recorded as deferred revenue. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
majority of our vehicle sales are made pursuant to purchase orders, although we do enter into purchase agreements from time to time. We also enter into both short- and
long-term vehicle maintenance agreements. We examine sales contracts to determine if the contract contains a multiple element arrangement, to determine whether the contract contains
multiple elements and, if so, to determine if separate units of accounting exist within the arrangement. As of June&nbsp;30, 2011 and December&nbsp;31, 2010, we have determined that all sales
arrangements should be accounted for as a single unit of accounting. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith
UK entered and Smith Europe enters into contracts with customers for the use of forklifts that we have determined to be lease transactions. At inception of these contracts, the
customer pays Smith UK or Smith Europe the full value of the forklift. At the end of a specified period, generally five years, the customer is contractually obligated to return the forklift to us and
we must pay the customer a residual value that was determined at the inception of the contract. The up-front payment received by Smith UK or Smith Europe from the customer is initially
recorded as deferred revenue and subsequently recognized as vehicle revenue on a straight-line basis, net of expected guaranteed repurchase payments, over the life of the contract.
Deferred revenue expected to be recognized as revenue more than one year subsequent to the balance sheet date is classified as long-term deferred revenue. We recognize the forklifts as a
component of property, plant and equipment throughout the contract term and depreciate the forklifts on a straight-line basis, net of salvage value, over the life of the contract. The
recognized depreciation expense is included as a component of cost of revenue in our combined and consolidated statements of operations. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Inventory valuation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We value our inventories at the lower of cost or market. Cost is computed using standard cost adjusted for purchase price variances,
which approximates actual cost on a first-in, first-out basis. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
each quarter- and year-end, we review inventory to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. This
requires us to determine the estimated selling price of our vehicles less the estimated cost to convert inventory on hand into a finished product. Our inventory valuation is based on our current
technology and estimates of demand, selling prices and production costs. Unforeseen changes in technology or our estimates of future selling prices or production costs may result in material
additional charges. We recorded permanent lower of cost or market adjustments of $3.7&nbsp;million, $4.6&nbsp;million, and $4.4&nbsp;million during for the six months ended June&nbsp;30, 2011
and for the years ended December&nbsp;31, 2010 and 2009, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the end of each period, we also review inventory for excess or obsolete items. When inventory on hand for a specific item is determined to be in excess of our demand forecast or no
longer used in current production, we permanently reduce the inventory value for those excess or obsolete items to the estimated recoverable amount. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Warranty  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate and accrue our warranty and additional service action costs for each vehicle at the time of sale. Because we currently have
only two vehicle platforms and little claims experience, estimates are principally based on assumptions regarding the warranty costs. In addition, the number and magnitude of additional service
actions expected to be approved, and actual additional service actions, are taken into consideration in our assumptions. Significant vehicle components, such as batteries, cab, chassis and motors are
covered under warranty by our suppliers. These vendor warranties generally extend from one to five years from the date of our purchase of the component. If a component fails within the warranty
period, we have the right to return the component part to the </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>vendor
and the vendor will either repair and return the component part, supply us with a new component part at no charge, or authorize us to offset the value against our open payable to the vendor.
The vendor warranty generally does not cover labor, travel or other costs we may incur when we provide the service action for our customer. We recognize warranty claim recoveries as an
adjustment to our warranty reserve when collection is reasonably assured. Future experience may result in changes in our assumptions, which could materially affect net income. Warranty reserves
amounted to $7.9&nbsp;million, $6.7&nbsp;million and $5.3&nbsp;million as of June&nbsp;30, 2011 and December&nbsp;31, 2010 and 2009, respectively. Adjustments to warranty reserves are
recorded as a component of vehicle cost of revenue. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Fair value of financial instruments  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have issued financial instruments that either contain embedded conversion or acceleration options or include detachable warrants. At
the date we issue a financial instrument, we measure and recognize as an asset or liability the fair value of that financial instrument. Changes in the fair value of these financial instruments in
subsequent periods are recognized as a component of our net loss and the carrying value of the asset or liability is adjusted accordingly. Fair value is defined as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on
the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Under applicable accounting guidance, a
fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, that may be used to measure fair value: </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2>Level&nbsp;1&#151;Quoted
prices in active markets for identical assets or liabilities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Level&nbsp;2&#151;Inputs
other than Level&nbsp;1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Level&nbsp;3&#151;Unobservable
inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. </FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have financial instruments, consisting of a Series&nbsp;A conversion option liability, a bridge note acceleration option asset, and a bridge note detachable warrant, that are valued
based on Level&nbsp;3 unobservable inputs that are supported by little or no market activity. As further described in Note&nbsp;3, "Fair Value of Financial Instruments" to our combined and
consolidated financial statements included elsewhere in this prospectus, our measurement of fair value requires significant management assumptions and estimates. The recognized loss for change in fair
value for these instruments, in the aggregate, was $1.7&nbsp;million both for the six months ended June&nbsp;30, 2011 and the year ended December&nbsp;31, 2010, and is included as a component of
other expense, net. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>59</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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</FONT> <FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RESULTS OF OPERATIONS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Six months ended June&nbsp;30, 2011 compared to six months ended June&nbsp;30, 2010  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An analysis of changes in key items included in the statements of operations for the six months ended June&nbsp;30, 2011 compared to
the six months ended June&nbsp;30, 2010 follows. Amounts have been rounded. Percent of revenues, dollar change and percent change are all calculated based on amounts presented in this table (dollar
amounts in millions): </FONT></P>
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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="46pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="49pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Six Months ended<BR>
June&nbsp;30, 2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Six Months ended<BR>
June&nbsp;30, 2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Amount </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% of<BR>
Revenues </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Amount </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% of<BR>
Revenues </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>$ Change </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Change </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Revenue</B></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vehicle</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>31.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>84.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>9.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>60.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>22.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>232</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Service and repairs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>39.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(0.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>37.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>21.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>138</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Significant Expenses</B></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cost of revenue&#151;vehicle</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>40.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>106.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>77.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>27.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>225</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cost of revenue&#151;service and repairs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>16.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>39.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(0.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total cost of revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>46.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>122.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>117.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>27.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>149</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>88</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Selling, general and administrative</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>27.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>59</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>58</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Government grant reimbursements</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(0.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(0.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(0.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Loss on extinguishment of debt</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>n/m</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other expense, net</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>157</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Provision (benefit) for income taxes</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Key Measurements</B></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Gross loss</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(22.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(17.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(5.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(211</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating loss</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(16.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(44.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(7.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(50.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(114</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(21.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(56.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(60.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(11.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(124</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B><I> Impact of foreign currency translation on reported results  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on the average exchange rate for each year, the British pound was stable versus the U.S. dollar during the six months ended
June&nbsp;30, 2011 compared with the same period of the prior year and, as a result, had a negligible impact on our operating results discussed below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Discussion of operating results  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Revenue increased $21.8&nbsp;million, or 138%, to $37.6&nbsp;million during the six months ended June&nbsp;30, 2011 from
$15.8&nbsp;million during the same period of the prior year. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vehicle
revenue increased $22.3&nbsp;million, or 232%, to $31.9&nbsp;million for the six months ended June&nbsp;30, 2011 from $9.6&nbsp;million for the six months ended
June&nbsp;30, 2010. Our U.S. sales increased $21.5&nbsp;million, to $25.4&nbsp;million for the six months ended June&nbsp;30, 2011 compared to $3.9&nbsp;million during the comparable period
of 2010. Although we had commenced U.S. operations by the beginning of 2010, our focus during the six months ended June&nbsp;30, 2010 was on developing our own processes and supply chain and on
developing customer leads. As a result, we had relatively few sales during this period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service
and repairs revenue decreased $0.5&nbsp;million, or 8%, to $5.7&nbsp;million for the six months ended June&nbsp;30, 2011 from $6.2&nbsp;million for the same period of the
prior year. The decrease in service and repairs revenue is primarily the result of the ongoing economic downturn. In response to the continued downturn, some fleet managers have continued the trend of
bringing service in-house to better control costs. As a result of this trend, our service and repairs revenue mix has continued to shift from fixed service contracts that primarily cover
scheduled maintenance activities, which have more </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>60</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>predictable
volume but lower margins, towards cost plus work not under a service contract that has less predictable volume but higher margins. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenue:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenue increased $27.5&nbsp;million, or 149%, to $46.0&nbsp;million during the six months ended June&nbsp;30,
2011
from $18.5&nbsp;million for the same period of the prior year. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vehicle
cost of revenue increased $27.7&nbsp;million, or 225%, to $40.0&nbsp;million for the six months ended June&nbsp;30, 2011 from $12.3&nbsp;million for the same period of
the prior year. This increase is primarily the result of a $26.4&nbsp;million increase in U.S. vehicle cost of revenue to support the increase in U.S. vehicle revenue. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service
and repairs cost of revenue decreased $0.2&nbsp;million, or 3%, to $6.0&nbsp;million for the six months ended June&nbsp;30, 2011 from $6.2&nbsp;million for the same
period of the prior year. The decrease in service and repair cost of revenue is primarily the result of the $0.5&nbsp;million decrease in service and repairs revenue, partially offset by continuing
fixed costs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross loss:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Gross loss increased $5.7&nbsp;million, to $8.4&nbsp;million for the six months ended June&nbsp;30, 2011 from
$2.7&nbsp;million
for the same period of the prior year. Gross loss as a percentage of revenue was 22.3% for the six months ended June&nbsp;30, 2011 compared to 17.1% for the six months ended June&nbsp;30, 2010.
This increase in gross loss is primarily attributable to a $4.9&nbsp;million increase in the U.S. gross loss as we increased sales, which currently have a negative gross margin. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development expense:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Research and development expense increased $0.7&nbsp;million, or approximately 88%, to
$1.5&nbsp;million for
the six months ended June&nbsp;30, 2011 from $0.8&nbsp;million for the same period of the prior year. The increase in research and development expense is primarily related to our efforts to
develop our second generation technology related to battery management (Smith Power), drive train components (Smith Drive), and chargers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expense:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expense increased $2.6&nbsp;million, or approximately
59%, to
$7.0&nbsp;million for the six months ended June&nbsp;30, 2011 from $4.4&nbsp;million for the same period of the prior year. The increase in selling, general and administrative expense was
primarily the result of a $2.2&nbsp;million increase in compensation expense combined with a $0.7&nbsp;million increase in legal and professional fees. The increase in compensation expense is
primarily related to an increase in staffing required to support our growth in the U.S. combined with a $0.6&nbsp;million increase in share-based and incentive compensation. The increase in legal
and professional fees is primarily related to defending litigation. See Note&nbsp;13, "Commitments and Contingencies" to the combined and consolidated financial statements included elsewhere in this
prospectus. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest expense for the six months ended June&nbsp;30, 2011 was $1.9&nbsp;million, an increase of $0.7&nbsp;million,
or
approximately 58%, from $1.2&nbsp;million of interest expense for the same period of the prior year. From March 2009 through December 2009, we placed approximately $10.4&nbsp;million of
Series&nbsp;A debentures and in January 2010 we placed approximately $0.7&nbsp;million of Series&nbsp;A debentures. As of June&nbsp;30, 2011, all $11.1&nbsp;million of Series&nbsp;A
debentures were outstanding. From March 2010 through October 2010 we placed, in increments, approximately $14.2&nbsp;million of bridge notes. These placements are discussed in additional detail
under "&#151;Liquidity and Capital Resources" below. The $0.7&nbsp;million increase in interest expense results from an increase in our average outstanding debt balance combined with
increased accretion and amortization of debt discount and deferred financing fees, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Government grant reimbursements:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Government grant reimbursements for the first six months of 2011 was $0.2&nbsp;million compared to
$0.3&nbsp;million for the first six months of 2010. The $0.2&nbsp;million of government grant reimbursements received during the six months ended June&nbsp;30, 2011 are primarily comprised of
balances received under the United Kingdom's national innovation agency programs sponsored by the U.K. Department for Business, Innovation and Skills. The $0.3&nbsp;million during the six </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>61</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>months
ended June&nbsp;30, 2010 is primarily comprised of qualified expenses that we incurred, submitted and were reimbursed for under the DOE EV Demonstration Project. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Loss on extinguishment of debt:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Loss on extinguishment of debt was $1.0&nbsp;million for the six months ended June&nbsp;30, 2011 as the
result of
conversion of the outstanding convertible promissory bridge notes to convertible redeemable preferred stock. During the six months ended June&nbsp;30, 2010, there was no loss on extinguishment of
debt. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expense, net:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Other expense, net for the six months ended June&nbsp;30, 2011 was $1.8&nbsp;million, an increase of
$1.1&nbsp;million from
$0.7&nbsp;million for the same period of the prior year. The increase in other expense, net is primarily the result of a $0.9&nbsp;million increase in net expense recognized related to the change
in the fair value of discrete derivatives related to our convertible debt. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax benefit:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We incurred operating losses in both of the primary jurisdictions in which we have operations. As we have a history
of operating
losses in both jurisdictions, we have fully reserved our net operating loss deferred tax assets. As a result, we did not record any income tax benefit during the six months ended June&nbsp;30, 2011
and 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net loss for the six months ended June&nbsp;30, 2011 was $21.3&nbsp;million, an increase of $11.8&nbsp;million from the
$9.5&nbsp;million net loss for the same period of the prior year. The increase in net loss was primarily a result of our geographic expansion into the U.S., which resulted in increased sales with a
negative gross margin and an increase in infrastructure and financing expense to support these operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Segment results  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have two reportable segments: Zero Emission Vehicles and Maintenance Services. See Note&nbsp;16, "Information about Segments and
Geographic Areas" to the combined and consolidated financial statements included elsewhere in this prospectus for a description of how we calculate segment income (loss). </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Zero Emission Vehicles segment represents the sale of vehicles we assemble. Intersegment revenues are primarily comprised of parts sold to the maintenance services segment. Zero
Emission Vehicles segment revenue, including both external customers and intersegment revenue, increased by approximately $22.3&nbsp;million to $31.6&nbsp;million, for the six months ended
June&nbsp;30, 2011 from $9.3&nbsp;million for the six months ended June&nbsp;30, 2010. Zero Emission Vehicles segment loss, which excludes corporate expenses and certain other unallocated costs,
increased approximately $7.7&nbsp;million, to $12.6&nbsp;million, for the six months ended June&nbsp;30, 2011 from $4.9&nbsp;million for the six months ended June&nbsp;30, 2010. Zero
Emission Vehicles segment revenue increased during the first six months of 2011 compared to the comparable period of 2010 primarily because, although we had commenced U.S. operations by the beginning
of 2010, our focus during the six months ended June&nbsp;30, 2010 was on developing our own processes and supply chain and on developing customer leads. As a result, our U.S. sales increased by
$21.5&nbsp;million, to $25.4&nbsp;million, for the six months ended June&nbsp;30, 2011 from $3.9&nbsp;million for the comparable period of 2010. The increase in Zero Emission Vehicles segment
loss is due primarily to our expansion in the United States, which resulted in an increase in segment gross loss as our cost of revenue exceeded our revenue, an increase in segment research and
development expense related to development of our Smith Power and Smith Drive technologies, and an increase in selling, general and administrative costs to support the ongoing geographical expansion
of our operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Maintenance Services segment represents our activities in connection with the servicing of diesel and electric engines for customers in the United Kingdom and the sale and lease of
forklifts. Intersegment revenues are primarily comprised of the provision of warranty-related repairs and service by the Maintenance Services segment on behalf of the Zero Emission Vehicles segment.
Maintenance Services segment revenue, including both external customers and intersegment revenue, decreased $1.0&nbsp;million, to $8.0&nbsp;million, for the six months ended June&nbsp;30, 2011
from $9.0&nbsp;million for the six </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>62</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>months
ended June&nbsp;30, 2010, and Maintenance Services segment loss, which excludes corporate expenses and certain other unallocated costs, increased by $0.4&nbsp;million, to
$0.5&nbsp;million, for the six months ended June&nbsp;30, 2011 compared to $0.1&nbsp;million for the six months ended June&nbsp;30, 2010. The decrease in Maintenance Services revenue is
primarily the result of the continued downturn in the economy, which resulted in the continuation of the trend of fleet managers bringing service in-house to better control costs.
Maintenance Services segment income (loss) approximated breakeven for the six months ended June&nbsp;30, 2011 and 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Year ended December&nbsp;31, 2010 compared to year ended December&nbsp;31, 2009  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An analysis of changes in key items included in the statements of operations for the year ended December&nbsp;31, 2010 compared to
the year ended December&nbsp;31, 2009 follows. Amounts have been rounded. Percent of revenues, dollar change and percent change are all calculated based on amounts presented in this table (dollar
amounts in millions): </FONT></P>
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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year ended<BR>
December&nbsp;31, 2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year ended<BR>
December&nbsp;31, 2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
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<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Amount </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% of<BR>
Revenues </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Amount </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% of<BR>
Revenues </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>$ Change </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Change </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Revenue</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vehicle</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>23.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>66.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>36.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>190</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Service and repairs</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>11.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>64.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(19</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total revenue</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>35.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>22.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>56</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Significant Expenses</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cost of revenue&#151;vehicle</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>93.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>58.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>19.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>147</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cost of revenue&#151;service and repairs</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>34.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>63.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(15</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total cost of revenue</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>45.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>127.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>27.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>121.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>17.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>63</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>136</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Selling, general and administrative</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>37.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>46.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>24</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>429</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Government grant reimbursements</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(0.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(0.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>n/m</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other expense, net</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>n/m</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Provision (benefit) for income taxes</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Key Measurements</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Gross loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(27.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(4.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(21.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(4.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(98</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(25.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(71.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(16.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(73.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(52</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(30.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(85.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(17.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(76.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(12.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(73</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
</TABLE>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B><I> Impact of foreign currency translation on reported results  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on the average exchange rate for each year, the British pound was stable versus the U.S. dollar during 2010 compared with 2009
and, as a result, had a negligible impact on our operating results discussed below. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> Discussion of operating results  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our vehicle revenues and vehicle cost of revenue for 2010 and 2009 were attributable to sales of the Smith Newton in the United States
and sales of the Smith Edison and Smith Newton, and sales and leases of forklifts, in the United Kingdom. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Revenue increased $12.8&nbsp;million, or 56%, to $35.6&nbsp;million for 2010 compared with $22.8&nbsp;million for 2009. As
explained
below, the increase in revenue is primarily the result of an increase in vehicle sales partially offset by a decrease in service and repairs revenue. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vehicle
revenue increased $15.6&nbsp;million, or 190%, to $23.8&nbsp;million for 2010 from $8.2&nbsp;million for 2009. Vehicle revenue increased in 2010 compared to 2009 primarily
because we did not commence operations in the U.S. until the fourth quarter of 2009. As a result, our U.S. sales increased by </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>63</FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>$13.7&nbsp;million,
from $0.2&nbsp;million in 2009 to $13.9&nbsp;million in 2010. The remainder of the increase is primarily due to a full year of sales of our lower GVW vehicle, the Smith
Edison. During 2008, we invested in research and development activities to improve the range of this vehicle. The improved-range vehicle was introduced in 2009 and had a full year of sales in 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service
and repairs revenue decreased $2.8&nbsp;million, or 19%, to $11.8&nbsp;million for 2010 from $14.6&nbsp;million for 2009. The decrease in service and repairs revenue is
primarily the result of the downturn in the economy, which resulted in some fleet managers bringing service in-house to better control costs. As a result of this trend, our service and
repairs revenue mix has shifted from fixed service contracts that primarily cover scheduled maintenance activities, which have more predictable volume but lower margins, towards cost plus work not
under a service contract that has less predictable volume but higher margins. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenue:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenue increased $17.5&nbsp;million, or 63%, to $45.3&nbsp;million for 2010 from $27.8&nbsp;million for 2009.
</FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vehicle
cost of revenue increased $19.7&nbsp;million, or 147%, to $33.1&nbsp;million for 2010 from $13.4&nbsp;million for 2009. Vehicle cost of revenue increased in 2010 compared
to 2009 primarily because we did not commence operations in the U.S. until the fourth quarter of 2009. As a result of the full year of U.S. operations in 2010, our vehicle cost of revenue increased by
approximately $21.8&nbsp;million. This increase was partially offset by a $4.1&nbsp;million decrease in U.K.-related warranty expense. Warranty expense during 2009 was significantly higher during
2010 due to technology issues related to Newton vehicles sold in the United Kingdom. These technology issues were resolved by 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service
and repairs cost of revenue decreased $2.2&nbsp;million, or 15%, to $12.2&nbsp;million for 2010 from $14.4&nbsp;million for 2009. The decrease in service and repairs cost
of revenue is primarily related to the $2.8&nbsp;million decrease in service and repairs revenue, partially offset by continuing fixed costs. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross loss:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Gross loss increased $4.8&nbsp;million, to $9.7&nbsp;million, for 2010, from $4.9&nbsp;million for 2009. Gross loss as a
percentage
of revenue was 27.2% for 2010 compared to 21.5% for 2009. Our gross loss increased approximately $8.1&nbsp;million primarily as the result of additional expenses as Smith US transitioned from a
start-up company to an operating company. This increase was partially offset by the $4.1&nbsp;million decrease in U.K.-related warranty expense discussed above. For 2010 and 2009, we had
a negative gross margin and, as a result, our gross loss increased as our revenues increased. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development expense:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Research and development expense increased $1.5&nbsp;million, or approximately 136%, to
$2.6&nbsp;million for
2010, from $1.1&nbsp;million for 2009. The increase in research and development expense is primarily related to our efforts during 2010 to develop our second generation technology related to battery
management (Smith Power), drive train components (Smith Drive), and chargers, as well as to develop our telemetry technology (Smith Link) to monitor, in real-time, key vehicle performance
measures. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expense:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expense increased $2.6&nbsp;million, or approximately
24%, to
$13.3&nbsp;million for 2010, from $10.7&nbsp;million for 2009. The increase in selling, general and administrative expense was primarily the result of a $4.0&nbsp;million charge for the
settlement of litigation and a $1.3&nbsp;million increase in compensation expense as we increased our U.S.
administrative staff to support the initiation of U.S. operating activities. These increases were partly offset by decreases in share-based compensation expense of $1.6&nbsp;million,
start-up costs of $0.5&nbsp;million, and professional services of $0.4&nbsp;million. The $1.6&nbsp;million decrease in share-based compensation expense is primarily due to
approximately $1.5&nbsp;million of expense recognized in 2009 upon the grant of common stock to our then current Chairman in December 2009 upon his appointment to that position. The
$0.5&nbsp;million decrease in start-up costs represents costs incurred during our 2009 initiation stage that were not repeated during 2010. The $0.4&nbsp;million decrease in
professional services expenses is due primarily to the decrease in legal and consulting expenses incurred during our inception period and the addition of staff to assume responsibilities previously
handled by consultants. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>64</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest expense for 2010 was $3.7&nbsp;million, an increase of $3.0&nbsp;million, or approximately 429%, from
$0.7&nbsp;million of interest expense for 2009. From March 2009 through December 2009, we placed approximately $10.4&nbsp;million of Series&nbsp;A debentures and in January 2010 we placed
approximately $0.7&nbsp;million of Series&nbsp;A debentures. From March 2010 through October 2010 we placed, in increments, approximately $14.2&nbsp;million of bridge notes. As of
December&nbsp;31, 2010, all $11.1&nbsp;million of Series&nbsp;A debentures and $14.2&nbsp;million of bridge notes were outstanding. These placements are discussed in additional detail under
"&#151;Liquidity and Capital Resources" below. The $3.0&nbsp;million increase in interest expense is primarily the result of a $1.5&nbsp;million increase in
payable-in-kind interest, due primarily to an increase in our average outstanding debt balance in 2010 compared with 2009, a $1.2&nbsp;million increase resulting from
accretion of debt discount, and a $0.4&nbsp;million increase resulting from amortization of deferred financing fees. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Government grant reimbursements:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Government grant reimbursements was $0.7&nbsp;million for 2010 compared to less than $0.1&nbsp;million
for 2009.
Government grant reimbursements for 2010 is primarily comprised of the $0.5&nbsp;million reimbursement of qualified research and development expenditures under the DOE EV Demonstration Project
combined with approximately $0.2&nbsp;million of reimbursements under the United Kingdom's national innovation agency programs. We had minimal expenses that qualified for reimbursement during 2009.
See Note&nbsp;2, "Summary of Significant Accounting Policies&#151;Government Grant Reimbursements" to the combined and consolidated financial statements included elsewhere in this prospectus
for additional information regarding the accounting for this grant income. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other expense, net:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Other expense, net for 2010 was $1.7&nbsp;million compared to $0.1&nbsp;million for 2009. The increase in other
expense, net,
is primarily the result of an increase in the fair value of embedded
derivative related to our convertible debt. Other expense, net is primarily comprised of the change in the fair value of embedded derivatives related to our convertible debt. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax benefit:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We incurred operating losses in both of the primary jurisdictions in which we have operations. As we have a history
of operating
losses in both jurisdictions, we have fully reserved our net operating loss deferred tax assets. As a result, we did not record any income tax benefit during either 2010 or 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net loss for 2010 was $30.3&nbsp;million, an increase of $12.8&nbsp;million from the $17.5&nbsp;million net loss for 2009.
The
increase in net loss was primarily a result of the $4.8&nbsp;million increase in our gross loss, the $4.0&nbsp;million accrual to settle pending litigation, the $3.0&nbsp;million increase in
interest expense, the $1.6&nbsp;million increase in expense related to the change in fair value of derivative financial instruments, and the $1.5&nbsp;million increase in research and development
expense, partially offset by the $1.4&nbsp;million decrease in share-based compensation expense. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Segment results  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Zero Emission Vehicles segment revenue, including both external customers and intersegment revenue, increased by approximately
$16.1&nbsp;million, to $23.6&nbsp;million for 2010 from $7.5&nbsp;million for 2009. Zero Emission Vehicles segment loss increased $4.9&nbsp;million, to $15.1&nbsp;million, for 2010 from
$10.2&nbsp;million for 2009. Zero Emission Vehicles segment revenue increased in 2010 compared to 2009 primarily because we did not commence operations in the U.S. until the fourth quarter of 2009.
As a result, our U.S. sales increased by $13.7&nbsp;million, from $0.2&nbsp;million in 2009 to $13.9&nbsp;million in 2010. The remainder of the increase is primarily due to a full year of sales
of our lower GVW vehicle, the Smith Edison that was introduced in the United Kingdom during 2009. The increase in Zero Emission Vehicles segment loss is due primarily to our expansion into the United
States, which resulted in an approximate $8.1&nbsp;million increase in segment gross loss as our cost of revenue exceeded our revenue, an approximate $1.3&nbsp;million increase in segment research
and development expense related to development of our Smith Power and Smith Drive technologies, and an approximate $0.7&nbsp;million increase in segment selling, general and administrative costs to
support the geographical expansion of our operations, and was partially offset by a $4.1&nbsp;million decrease in U.K.-related warranty expense. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>65</FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maintenance
Services segment revenue, including both external customers and intersegment revenue, decreased $4.4&nbsp;million, to $16.6&nbsp;million, for 2010 from
$21.0&nbsp;million for 2009, and Maintenance Services segment income (loss) decreased $1.6&nbsp;million, to a $(0.7) million loss, for 2010 compared to $0.9&nbsp;million of income for 2009. The
decrease in maintenance services external revenues is primarily the result of the downturn in the economy, which resulted in some fleet managers bringing service in-house to better control
costs. Additionally, the sale and lease of forklifts decreased as we focused our efforts and resources on our zero emission vehicle segment. The $1.6&nbsp;million decrease in maintenance services
segment income (loss) relates primarily to a decrease in fixed service contracts combined with the decrease in forklift sales and leases. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Year ended December&nbsp;31, 2009 compared to year ended December&nbsp;31, 2008  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An analysis of changes in key items included in the statements of operations for the year ended December&nbsp;31, 2009 compared to
December&nbsp;31, 2008 follows. Amounts have been rounded. Percent of revenues, dollar change and percent change are all calculated based on amounts presented in this table (dollar amounts in
millions): </FONT></P>
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<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year ended<BR>
December&nbsp;31, 2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year ended<BR>
December&nbsp;31, 2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Amount </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% of<BR>
Revenues </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Amount </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% of<BR>
Revenues </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>$ Change </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>% Change </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Revenue</B></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vehicle</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>36.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>43.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(6.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2> (42</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Service and repairs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>64.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>56.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(3.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(20</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total revenues</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>22.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>32.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9.6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(30</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Significant Expenses</B></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cost of revenue&#151;vehicle</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>58.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>21.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>67.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(38</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cost of revenue&#151;service and repairs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>63.2</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>55.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(3.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(20</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total cost of revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>27.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>121.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>39.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>122.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(12.0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(30</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>9.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>29.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(88</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Selling, general and administrative</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>46.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>16.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>98</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>n/m</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Provision (benefit) for income taxes</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other expense, net</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.1</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>n/m</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Key Measurements</B></FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Gross loss</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(4.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(21.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(7.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(22.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>34</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating loss</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(16.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(73.7</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(22.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(68.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>25</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(17.5</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(76.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(22.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(68.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4.8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>22</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B><I> Impact of foreign currency translation on reported results  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on the average exchange rate for each year, the British pound was weaker versus the U.S. dollar during the year ended
December&nbsp;31, 2009 compared with the year ended December&nbsp;31, 2008. The amount of the impact, when necessary for an understanding of our operating results, is included in the discussion
below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Discussion of operating results  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our vehicle revenues and vehicle cost of revenue for 2009 and 2008 were primarily attributable to sales of the Smith Edison, the Smith
Newton and sale and lease of forklifts in the United Kingdom. Smith US did not commence operations until January 2009 and recognized the sale of only one vehicle during 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Revenue decreased $9.6&nbsp;million, or 30%, to $22.8&nbsp;million for 2009 compared with $32.4&nbsp;million for 2008.
Approximately
$4.2&nbsp;million of this decrease was attributable to fluctuations in </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>66</FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>the
British pound versus the U.S. dollar. The remaining decrease of $5.4&nbsp;million is primarily the result of weaker vehicle sales as explained below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vehicle
revenue, exclusive of the currency impact, decreased approximately $4.5&nbsp;million, or approximately 32%, from 2008 to 2009. During 2008, we had significant orders from two
customers that replaced existing vehicles that were taken out of service with new electric vehicles. During 2009, the economic downturn resulted in vehicle operators, including the two customers that
had made significant purchases during 2008, to continuing to hold and maintain their existing fleets. In addition, forklift sales and leases decreased as we reduced our bulk purchases and subsequent
sale and lease of forklifts to focus on our Smith Newton and Smith Edison vehicles. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service
and repairs revenue, exclusive of the currency impact, decreased approximately $0.9&nbsp;million, or approximately 5%, from 2008 to 2009. This decrease is primarily the result
of the downturn in the economy, which resulted in a loss of service contracts as some fleet managers initiated the process of bringing service in-house to better control costs. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenue:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenue decreased $12.0&nbsp;million, or 30%, to $27.8&nbsp;million for 2009 compared with $39.8&nbsp;million
for
2008. Approximately $4.8&nbsp;million of this decrease was attributable to fluctuations in the British pound versus the U.S. dollar. The remaining decrease of $7.2&nbsp;million is explained below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vehicle
cost of revenue, exclusive of the currency impact, decreased approximately $6.2&nbsp;million, or approximately 29%, from 2009 to 2008. This decrease is primarily the result of
the decline in vehicle sales partly increased by an increase in our warranty expense. During 2009, we identified a problem with the batteries of Newton vehicles built in the United Kingdom. As a
result, we increased our warranty expense by approximately $3.2&nbsp;million. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Service
and repairs cost of revenue, exclusive of the currency impact, decreased approximately $1.0&nbsp;million, or approximately 6%, from 2009 to 2008. This decrease is primarily
related to the decrease in service and repairs revenue in 2009 compared to 2008. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross loss:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Gross loss decreased $2.5&nbsp;million, or approximately 34%, to $4.9&nbsp;million for 2009 compared with $7.4&nbsp;million
for
2008. Gross loss as a percentage of revenues was 21.5% during 2009 compared with 22.8% during 2008. The decrease in gross loss primarily results from a decline in vehicle revenue as we were selling
vehicles at a negative margin, partially offset by an increase in warranty expense. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and development expense:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Research and development expense decreased $8.4&nbsp;million, or approximately 88%, to
$1.1&nbsp;million for
2009 compared with $9.5&nbsp;million for 2008. Costs incurred during 2009 included general research and development and costs related to preparing the Smith Newton for sale in North America. Costs
incurred during 2008 were primarily related to the development of improved technology for our Edison vehicle in Europe, including improved drivelines, development of lithium-ion batteries, and
improved battery charging. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expense:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative expense increased $5.3&nbsp;million, or approximately
98%, to
$10.7&nbsp;million for 2009 compared with $5.4&nbsp;million for 2008. The increase is primarily the result of the January 2009 inception of Smith US. Smith US incurred $6.1&nbsp;million of
selling, general and administrative during 2009. The combined selling, general and administrative costs of Smith US and Smith UK for 2009 included increases in share-based compensation of
$1.7&nbsp;million, management fees of $1.2&nbsp;million, professional services of $1.1&nbsp;million, salaries and other compensation of $1.0&nbsp;million, marketing expenses of
$0.8&nbsp;million, and start-up costs of $0.5&nbsp;million. The $1.7&nbsp;million increase in share-based compensation expense is primarily comprised of approximately
$1.5&nbsp;million of expense related to a grant of common stock to our then current Chairman in December 2009 upon his appointment to that position and $0.2&nbsp;million representing services
contributed by our founding shareholders upon inception in exchange for shares of common stock. The $1.2&nbsp;million increase in management fees represents an increase in various
pass-through and </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>67</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>shared
corporate expenses charged by Tanfield to Smith UK. The increase in professional fees primarily relates to fees paid to consultants engaged and legal fees incurred during the inception period
and certain other general legal expenses. The $1.0&nbsp;million increase in compensation costs relate primarily to the increase in our U.S. administrative staff to support the initiation of U.S.
operating activities. The $0.8&nbsp;million increase in marketing expenses primarily relates to costs incurred to promote the Smith brand in the U.S. The $0.5&nbsp;million of general
start-up costs include production and related facility and overhead costs incurred by Smith US during the 2009 inception period. The increase in Smith US selling, general and
administrative expense was partially offset by a $0.8&nbsp;million decrease in selling, general and administrative expense due to the impact of foreign currency translation. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest expense:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Interest expense for 2009 was $0.7&nbsp;million. We did not incur any interest expense during 2008. The 2009 interest
expense is
the result of Smith US's debt financing to support its start-up activities. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income tax benefit:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We incurred operating losses in both of the primary jurisdictions in which we have operations. As we have a history
of operating
losses in both jurisdictions, we have fully reserved our net operating loss deferred tax assets. As a result, we did not record any income tax benefit during either 2009 or 2008. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net loss:</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Net loss for 2009 was $17.5&nbsp;million, a decrease of $4.8&nbsp;million from the 2008 net loss of $22.3&nbsp;million.
Approximately
$1.6&nbsp;million of this decrease was attributable to fluctuations in the British
pound versus the U.S. dollar. The remainder of the decrease in net loss is primarily the result of a decrease in research and development spending as a result of the completion of our 2008 project to
improve the technology for the Edison and a decrease in inventory adjustments, partially offset by an increase in selling, general and administrative expenses primarily due to the initiation of
operations in the United States. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Segment results  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Zero Emission Vehicles segment revenue, including both external customers and intersegment revenue, decreased by $1.5&nbsp;million,
to $7.5&nbsp;million, for 2009 from $9.0&nbsp;million for 2008. Zero Emission Vehicles segment loss decreased $10.2&nbsp;million, to $10.2&nbsp;million, for 2009 from $20.4&nbsp;million for
2008. The decrease in segment revenue is primarily the result of an approximate $1.4&nbsp;million currency impact due to the weakening of the British pound versus the U.S. dollar during 2009 as
compared with 2008. The decrease in segment external revenue, which was largely offset by an increase in intersegment revenue, was primarily the result of the economic downturn which resulted in
vehicle operators, including the two customers that had made significant purchases during 2008, continuing to hold and maintain their existing fleets. The $10.2&nbsp;million decrease in Zero
Emission Vehicles segment loss is primarily the result of an $8.4&nbsp;million decrease in research and development spending combined with an approximate $1.9&nbsp;million currency impact due to
the weakening of the British pound versus the U.S. dollar during 2009 as compared with 2008. During 2008, we incurred significant research and development costs primarily related to the development of
improved technology for our Edison vehicle in Europe, including improved drivelines, development of lithium-ion batteries, and improved battery charging. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Maintenance
Services segment revenue, including both external customers and intersegment revenue, decreased $3.3&nbsp;million, to $21.0&nbsp;million for 2009 from
$24.3&nbsp;million for 2008, and Maintenance Services segment income had a slight decrease of $0.1&nbsp;million, to $0.9&nbsp;million, for 2009 compared to $1.0&nbsp;million for 2008. The
decrease in segment revenue is primarily the result of an approximate $3.9&nbsp;million currency impact due to the weakening of the British pound versus the U.S. dollar during 2009 as compared with
2008. An increase in intersegment revenue was largely offset by a decline in external revenue, primarily attributable to a decrease in forklift sales and leases as we reduced our sale and lease of
forklifts to focus on our Smith Newton and Smith Edison vehicles. The $0.1&nbsp;million decrease in the Maintenance Services segment income relates primarily to the foreign currency impact of the
weakening of the British pound versus the U.S. dollar during 2009 as compared with 2008. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>68</FONT></P>

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</FONT> <FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> LIQUIDITY AND CAPITAL RESOURCES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Sources of liquidity  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary source of cash from January&nbsp;1, 2009 through June&nbsp;30, 2011 has been the proceeds from the sale of our
Series&nbsp;A debentures, our bridge notes and our Series&nbsp;B preferred stock. During this period, our financing activities have provided us with aggregate net proceeds of approximately
$61.8&nbsp;million. For 2008, 2009 and 2010, the primary source of cash for Smith UK was cash made available by Tanfield. Cash flows related to the Series&nbsp;A debentures, our bridge notes and
our Series&nbsp;B preferred stock are discussed below in "&#151;Cash flows&#151;Cash flow provided by financing activities." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of June&nbsp;30, 2011, we had $7.2&nbsp;million in cash and cash equivalents. On September&nbsp;14, 2011, we issued the senior note for cash proceeds of $2.8&nbsp;million.
Between October&nbsp;7, 2011 and October&nbsp;31, 2011, we issued and sold the 2011 convertible notes and 2011 warrants for aggregate proceeds of $30.0&nbsp;million, consisting of cash proceeds
of $25.2&nbsp;million, cancellation of the $2.8&nbsp;million of indebtedness under the senior note and the conversion of approximately $2.0&nbsp;million of the outstanding balance of the
purchase price we owe to Tanfield in connection with the acquisition of our Smith UK business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the six months ended June&nbsp;30, 2011 and during each of the three years ended December&nbsp;31, 2010, our operating activities used significant cash. We expect that our
cash and cash equivalents, together with the proceeds of the issuance of the senior note and our 2011 convertible notes and our anticipated cash from operating activities, will be sufficient to fund
our operating activities, including our planned capital expenditures and research and development activities, through the first quarter of 2012. As such, we plan to pursue additional funding through
one or more private placements of our equity or debt securities. We cannot be certain that additional funds will be available to us on favorable terms or at all. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Cash flows  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Summary of cash flows (in thousands)  </I></B></FONT></P>
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<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Years ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Six Months ended<BR>
June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net cash used in operating activities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(12,274</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(12,573</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(26,406</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(22,473</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(5,820</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net cash used in investing activities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1,662</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(804</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(524</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1,707</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(812</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net cash provided by financing activities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13,679</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14,254</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>27,239</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>30,349</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,687</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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 <P style="font-family:times;"><FONT SIZE=2><B><I> Cash flows used in operating activities  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net cash used in operating activities totaled $22.5&nbsp;million for the six months ended June&nbsp;30, 2011. Our net cash used
in operating activities for the six months ended June&nbsp;30, 2011 was comprised primarily of our net loss of $21.3&nbsp;million combined with $13.2&nbsp;million of cash used by changes in
operating assets and liabilities, partially offset by $12.0&nbsp;million of non-cash charges and credits. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
non-cash charges and credits primarily consist of the provision for inventory impairment of $3.7&nbsp;million, primarily as the result of our lower of cost or market
adjustment, a $2.7&nbsp;million warranty charge, primarily related to our increased vehicle revenue, a $1.7&nbsp;million charge related to the change in fair value of financial instruments, the
$1.0&nbsp;million loss on debt extinguishment, a $0.9&nbsp;million increase in accrued paid-in-kind interest, and $0.7&nbsp;million depreciation and amortization. See
Note&nbsp;9, "Convertible Debt and Convertible Redeemable Preferred Stock" to the combined and consolidated financial statements included elsewhere in this prospectus for additional information
regarding the calculation of the fair value of the financial instruments and the accretion of the discount on convertible debt. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>69</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
most significant changes in operating assets and liabilities were the $4.2&nbsp;million use of cash related to an increase in receivables and the $6.7&nbsp;million use of cash
related to the decrease in deferred revenue. Receivables will fluctuate from period to period based on the timing of sales. Deferred revenue decreased as we recognized revenue related to the vehicles
for which we received cash prior to December&nbsp;31, 2010 but completed and transferred title subsequent to December&nbsp;31, 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
net cash used in operating activities totaled $12.3&nbsp;million for the year ended December&nbsp;31, 2010. Our net cash used in operating activities for 2010 was comprised
primarily of our net loss of $30.3&nbsp;million, partially offset by approximately $13.6&nbsp;million of non-cash charges and credits and $4.4&nbsp;million of cash generated by
changes in operating assets and liabilities. The non-cash charges and credits primarily consist of the provision for inventory impairment of $4.6&nbsp;million, primarily as the result of
our lower of cost or market adjustment, the provision for warranty reserve of $2.1&nbsp;million, accrued paid-in-kind interest on our Series&nbsp;A debentures and bridge
notes of $1.9&nbsp;million, the change in the fair value of financial instruments of $1.7&nbsp;million, accretion of the discount on convertible debt of $1.3&nbsp;million, and depreciation and
amortization of $1.1&nbsp;million. See Note&nbsp;9, "Convertible Debt and Convertible Preferred Stock" to the combined and consolidated financial statements included elsewhere in this prospectus
for additional information regarding the calculation of the fair value of the financial instruments and the accretion of the discount on convertible debt. The most significant changes in operating
assets and
liabilities were the $16.1&nbsp;million use of cash related to the increase of our inventories, partially offset by $12.0&nbsp;million of cash generated by the increase in accounts payable,
$6.1&nbsp;million of cash generated by the increase in deferred revenue, and a $3.1&nbsp;million increase in other current liabilities. The inventory use of cash and the source of cash related to
accounts payable were primarily to build inventory in the U.S. to support the growth in operating activities. The source of cash related to deferred revenue is primarily due to the timing of payments
received in advance of vehicle delivery. The source of cash related to other liabilities, which will fluctuate from period to period based on the timing of underlying transactions, is comprised
primarily the result of a $4.0&nbsp;million accrual for the anticipated settlement of a lawsuit. See Note&nbsp;13, "Commitments and Contingencies" to the combined and consolidated financial
statements included elsewhere in this prospectus for additional information regarding this lawsuit. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
net cash used in operating activities totaled $12.6&nbsp;million for the year ended December&nbsp;31, 2009. Our net cash used in operating activities for 2009 was comprised
primarily of our net loss of $17.5&nbsp;million combined with $7.3&nbsp;million of cash used to support changes in operating assets and liabilities, partially offset by $12.3&nbsp;million of
non-cash charges and credits. The non-cash charges and credits primarily consist of the provision for warranty charge of $4.6&nbsp;million, provision for inventory impairment
of $4.4&nbsp;million, primarily as the result of our lower of cost or market adjustment, share-based compensation of $1.5&nbsp;million, depreciation and amortization of $0.8&nbsp;million, and
accrued paid-in-kind interest on our Series&nbsp;A debentures of $0.4&nbsp;million. The most significant changes in operating assets and liabilities were the
$5.4&nbsp;million use of cash related to the increase of our inventories, primarily related the initiation of operating activities in the United States, the $1.1&nbsp;million use of cash related
to other current liabilities, primarily the result of payments related to existing warranty liabilities, and the $0.9&nbsp;million use of cash related to other current assets, primarily as a result
of advanced shipment deposits to suppliers related to commencing operations in the United States. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
net cash used in operating activities totaled $26.4&nbsp;million for the year ended December&nbsp;31, 2008. Our net cash used in operating activities for 2008 was comprised
primarily of our net loss of $22.3&nbsp;million combined with $12.4&nbsp;million of cash used to support changes in operating assets and liabilities, partially offset by $8.3&nbsp;million of
non-cash charges and credits. The non-cash charges and credits primarily consist of the provision for inventory impairment of $5.9&nbsp;million, primarily as the result of
our lower of cost or market adjustment, provision for warranty charge of $1.4&nbsp;million, and depreciation and amortization of $0.8&nbsp;million. The most significant changes in operating assets
and liabilities were the $11.3&nbsp;million use of cash related to the increase of our inventories, the $4.2&nbsp;million </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>70</FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>use
of cash related to accounts payable, and the $2.6&nbsp;million source of cash related to trade accounts receivable. During the last part of 2007 and early 2008, our business was improving and,
accordingly, we had an increase in receivables at the end of 2007 and we were building inventory in 2007 and early 2008 to support anticipated growth. The increase in inventory also increased our
payables as of the end of 2007. We did not realize our anticipated growth during 2008 and sales weakened during the last half of the year. As a result, payables decreased as we slowed our inventory
purchases, inventory increased as we slowed production, and receivables decreased as we had fewer sales. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Cash flows used in investing activities  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our net cash used in investing activities principally relates to investments in processes and infrastructure that enable us to expand
our production and operating capabilities. Capital expenditures were $1.7&nbsp;million, $1.7&nbsp;million, $0.8&nbsp;million and $0.5&nbsp;million for the six months ended June&nbsp;30, 2011
and the years ended December&nbsp;31, 2010, 2009 and 2008, respectively. Capital expenditures for the six months ended June&nbsp;30, 2011 and for the year ended December&nbsp;31, 2010 were
primarily related to the acquisition of tooling to support our growing operations in the United States, the acquisition of computer and related equipment to support the increase in staffing in the
United States and the assembly of vehicles to use as demonstration vehicles and for research and development testing. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> Cash flows provided by financing activities  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the six months ended June&nbsp;30, 2011, our cash provided by financing activities amounted to $30.3&nbsp;million. This
source of cash is primarily comprised of $37.8&nbsp;million of net proceeds from the issuance of our Series&nbsp;B preferred stock, partially offset by $6.5&nbsp;million of payments made to
Tanfield related to our acquisition of Smith UK and $0.8&nbsp;million of deferred offering costs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the year ended December&nbsp;31, 2010, our cash provided by financing activities amounted to $13.7&nbsp;million. This amount is comprised primarily of proceeds from the
issuance of our Series&nbsp;A debentures and bridge notes of $14.8&nbsp;million, partially offset by the related $0.9&nbsp;million of debt issuance costs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the year ended December&nbsp;31, 2009, our cash provided by financing activities amounted to $14.3&nbsp;million and was comprised primarily of $10.4&nbsp;million of proceeds
received from the issuance of units consisting of Series&nbsp;A debentures and common stock, partially offset by the related debt issuance costs of $0.4&nbsp;million. The net cash provided by
Tanfield during the year ended December&nbsp;31, 2009 amounted to approximately $4.3&nbsp;million. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the year ended December&nbsp;31, 2008, Tanfield provided approximately $27.4&nbsp;million of cash to Smith UK. Smith US was not yet in existence and, therefore, did not have
any financing activities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Series&nbsp;A debentures  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From March 2009 through January 2010, we sold in a private placement 111.25 units for aggregate proceeds of $11.1&nbsp;million. We
received aggregate proceeds from this financing of $10.4&nbsp;million in 2009 and of $0.7&nbsp;million in 2010. Each unit consisted of one Series&nbsp;A debenture in the principal amount of
$100,000 and 6,666 shares of our common stock. Each Series&nbsp;A debenture has a five year term and bears interest, payable in shares of our common stock, at the rate of 10% per annum. The
Series&nbsp;A debentures are secured by all of our assets. Subject to prepayment, acceleration or conversion, interest and principal due on each Series&nbsp;A debenture will be payable at the end
of the five year term. The Series&nbsp;A debentures are convertible, at the option of the holder, at 80% of the price at which shares of our common stock are valued in this offering or, if earlier,
80% of the price at which shares of our common stock are sold in a corporate reorganization. We may prepay principal and interest on the Series&nbsp;A debentures at any time without penalty. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>71</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of June&nbsp;30, 2011, we have outstanding the $11.1&nbsp;million in principal amount of Series&nbsp;A debentures, along with accrued interest of approximately
$2.2&nbsp;million. Holders of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in principal amount of our Series&nbsp;A debentures have notified us of their election to convert their debentures, including accrued interest,
into
shares of our common stock immediately following the closing of this offering. We intend to use $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of the net proceeds to use of this offering to prepay the remaining
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
principal amount of Series&nbsp;A debentures and accrued interest thereon. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Bridge notes  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From March 2010 through October 2010, we sold $14.2&nbsp;million of bridge notes in a private placement. Each bridge note issued
included a detachable warrant, with a stated per share exercise price of $0.01, that allows the holder to purchase 25% of the number and type of security into which the bridge note was convertible.
The stated term of each bridge note was the lesser of one year from the issuance date or the date of an equity offering resulting in gross proceeds to us of at least $20.0&nbsp;million, or a
qualified offering. The bridge notes were unsecured obligations of ours and ranked senior to our Series&nbsp;A debentures. Interest on the bridge notes was payable in kind at a rate of 12% per
annum. Upon a successful qualified offering, the principal and interest became due and payable immediately or, at the option of the holder, the principal plus accrued
paid-in-kind interest could be converted into shares of the equity security issued in the qualified offering at a conversion price equal to the price per share of the equity
securities issued in the qualified offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
warrant included in each unit was exercisable at the option of the holder from the date of the qualified offering through the second anniversary of the issuance date of the warrant.
The bridge note did not need to be converted in order for the holder to exercise the warrant. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I> Series&nbsp;B preferred stock  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During March 2011, in a private placement we sold approximately 3,239,000 shares of our Series&nbsp;B preferred stock for cash
proceeds of $39.0&nbsp;million. We also issued an additional approximate 1,570,000 shares of Series&nbsp;B preferred stock upon the conversion of our outstanding bridge notes and the holders'
exercise of the related warrants, as this private placement constituted a qualified offering. There was $14.2&nbsp;million in principal amount of bridge notes outstanding with accrued
paid-in-kind interest of $1.1&nbsp;million as of the date on which the bridge notes converted. We also paid in cash approximately $171,000 to holders who elected not to
convert a portion of their bridge notes. Shares of our Series&nbsp;B preferred stock have the right to vote, on an as-converted basis, together with shares of our common stock on all
matters which are subject to a vote of our common stock, and also have separate voting rights with respect to certain amendments of our second amended and restated certificate of incorporation and
certain liquidation events. Our Series&nbsp;B preferred stock has a liquidation preference of $12.04 per share (subject to adjustment) over our common stock. Our Series&nbsp;B preferred stock is
convertible, on a one-to-one basis, into shares of our common stock at any time at the election of the holder or automatically in the event of a firm commitment underwritten
public offering of our common stock, and is subject to certain anti-dilution protections. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Senior note financing  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;14, 2011, we issued and sold the senior note for cash proceeds of $2.8&nbsp;million to an existing stockholder.
The senior note accrued interest at 8.00% per annum and had a maturity date of December&nbsp;31, 2011. The senior note was automatically convertible into shares of our equity securities immediately
prior to the closing of the initial public offering of our common stock and was redeemable by us upon the closing of a private placement of our equity securities that provides us with at least
$20.0&nbsp;million in net proceeds. We exchanged the senior note in connection with our 2011 convertible notes financing discussed below. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>72</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P style="font-family:times;"><FONT SIZE=2><A
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<P style="font-family:times;"><FONT SIZE=2><I> 2011 convertible notes financing  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between October&nbsp;7, 2011 and October&nbsp;31, 2011, we issued and sold in a private placement convertible notes having an
aggregate principal amount of $30.0&nbsp;million and seven-year warrants to purchase shares of our common stock for aggregate proceeds of $30.0&nbsp;million. The aggregate proceeds
consisted of cash proceeds of $25.2&nbsp;million, cancellation of the $2.8&nbsp;million of indebtedness under the senior note and the conversion of approximately $2.0&nbsp;million of the
outstanding balance of the purchase price we owe to Tanfield in connection with the acquisition of our Smith UK business. Each convertible note had a maturity date that was three years from its date
of issuance and accrued interest at a per annum rate of 8.50%, 12.00% and 15.00% for the first, second and third year of its term, respectively. Each convertible note provided for automatic conversion
into shares of our equity securities (i)&nbsp;upon the issuance of convertible notes resulting in net proceeds to us of at least $30.0&nbsp;million, (ii)&nbsp;in connection with the first sale
of any class of our equity securities that results in net proceeds to us, when added to the net proceeds received by us from the issuance and sale of the 2011 convertible notes, of at least
$30.0&nbsp;million, and (iii)&nbsp;upon the pricing of an initial public offering of our common stock that results in net proceeds to us of at least $50.0&nbsp;million. We had the right to
prepay the 2011 convertible notes at any time using cash flow generated from our operations. Each warrant can be exercised at any time for the number of shares of our common stock equal to 30% of the
initial principal amount of the related note divided by the exercise price of $12.38. Each 2011 warrant automatically will be exercised upon the pricing of an initial public offering of our common
stock on a cashless exercise basis with a deemed purchase price per share equal to the price at which our common stock is offered to the public in such offering. The 2011 convertible notes converted
into shares of our Series&nbsp;C preferred stock upon our receipt of $30.0&nbsp;million of proceeds from the 2011 convertible notes financing. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><I> Series&nbsp;C preferred stock issuance  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between November&nbsp;3, 2011 and November&nbsp;8, 2011, we issued 2,431,170 shares of our Series&nbsp;C preferred stock in
connection with the conversion of all of our outstanding 2011 convertible notes. We did not receive any additional cash proceeds upon the conversion of the 2011 convertible notes into Series&nbsp;C
preferred stock. Shares of our Series&nbsp;C preferred stock have the right to vote, on an as-converted basis, together with shares of our Series&nbsp;B preferred stock and common
stock on all matters which are subject to a vote of our common stock, and also have voting rights, both together with our Series&nbsp;B preferred stock and as a separate class, with respect to
certain amendments of our third amended and restated certificate of incorporation and certain liquidation events. Our Series&nbsp;C preferred stock has a liquidation preference of $12.38 per share
(subject to adjustment), which is pari passu with the liquidation preference of our Series&nbsp;B preferred stock. Our Series&nbsp;C preferred stock is convertible, on a
one-to-one basis, into shares of our common stock at any time at the election of the holder or automatically in the event of a firm commitment underwritten public offering of
our common stock, and is subject to certain anti-dilution protections. The holders of at least a majority of the outstanding shares of Series&nbsp;B preferred stock and Series&nbsp;C
preferred stock, voting together as a single class, can require us to
redeem all outstanding shares of Series&nbsp;B preferred stock and Series&nbsp;C preferred stock on or after March&nbsp;1, 2018. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> CONTRACTUAL OBLIGATIONS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows our contractual payment obligations for our long term debt and future purchase obligations as of
December&nbsp;31, 2010. We did not have any unrecognized tax benefits as of </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>73</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P style="font-family:times;"><FONT SIZE=2><A
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<BR>

<P style="font-family:times;"><FONT SIZE=2>December&nbsp;31,
2010. Interest on our convertible debt is calculated based on the contractual loan maturity at the stated interest rate in effect at December&nbsp;31, 2010 (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="47pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="35pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:114pt;"><FONT SIZE=1><B>Certain Contractual Obligations

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Less than<BR>
1&nbsp;year </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>1&nbsp;-&nbsp;3<BR>
Years </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>4&nbsp;-&nbsp;5<BR>
years </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>After 5<BR>
years </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Convertible debt</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>25,275</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14,150</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>11,125</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest payable in kind</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8,375</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,742</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,633</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest payable in cash</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating leases</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>842</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>574</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>194</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>74</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Lawsuit settlement</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Purchase orders, primarily for inventory</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12,297</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12,297</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total contractual payment obligations</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>50,789</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>30,763</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,194</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>17,832</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table shows our contractual payment obligations for our long term debt and future purchase obligations as of June&nbsp;30, 2011. We did not have any unrecognized tax
benefits as of June&nbsp;30, 2011. Interest on our convertible debt is calculated based on the contractual loan maturity at the stated interest rate in effect at June&nbsp;30, 2011 (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="47pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="35pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:114pt;"><FONT SIZE=1><B>Certain Contractual Obligations

<!-- COMMAND=ADD_SCROPPEDRULE,114pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Less than<BR>
1&nbsp;year </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>1&nbsp;-&nbsp;3<BR>
Years </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>4&nbsp;-&nbsp;5<BR>
years </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>After 5<BR>
years </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Convertible debt</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>11,125</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,889</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8,236</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Note payable&#151;Tanfield</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,750</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,250</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest payable in kind</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,633</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,758</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,875</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest payable in cash</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>471</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>463</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating leases</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,686</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>838</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>794</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>54</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Lawsuit settlement</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Purchase orders, primarily for inventory</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18,783</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18,783</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total contractual payment obligations</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>50,448</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>29,334</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,949</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13,165</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD style="font-family:times;">&nbsp;</TD>
<TD style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May 2011, the Financial Accounting Standards Board updated the guidance regarding certain accounting and disclosure requirements
related to fair value measurements. The updated guidance amends GAAP to create more commonality with International Financial Reporting Standards by changing some of the wording used to describe
requirements for measuring fair value and for disclosing information about fair value measurements. This update is effective for fiscal years, and interim periods within those years, beginning after
December&nbsp;15, 2011. Early adoption is not permitted. We do not expect the adoption of this update to have a material impact on our financial position, results of operations or cash flows. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OFF-BALANCE SHEET ARRANGEMENTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2010 and June&nbsp;30, 2011, we had no off-balance sheet arrangements that have or are
reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures,
or capital resources, except for operating leases. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>74</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=6,SEQ=81,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=365335,FOLIO='74',FILE='DISK126:[11ZDO1.11ZDO78101]DQ78101A.;10',USER='JMCGUAN',CD=';9-NOV-2011;19:49' -->
<A NAME="page_dq78101_1_75"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Foreign currency risk  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our purchases and sales are generally denominated in the local currency (U.S. dollar for U.S. operations and the British pound for U.K.
operations). As a result, we have limited direct exposure to currency risk and a 10% change in currency rate of exchange would have an immaterial impact on our cash flows. However, many of our
suppliers are either located in a foreign jurisdiction or source key components of their products from foreign jurisdictions. If our local currency depreciates significantly against the local currency
of our supply chain, it could cause our suppliers to raise their prices, which could adversely impact our operating results and cash flow. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Interest rate risk  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have issued only fixed rate debt with interest paid-in-kind. We have limited cash and generally do not
invest excess cash. As a result, a 10% change in interest rates would have an immaterial impact on our cash flows. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> INTERNAL CONTROL OVER FINANCIAL REPORTING  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Material weaknesses  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the preparation of our combined financial statements as of and for the years ended December&nbsp;31, 2010, 2009
and 2008, we identified material weaknesses in our internal control over financial reporting existing as of December&nbsp;31, 2010. A material weakness is defined as a deficiency, or combination of
deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be
prevented or detected on a timely basis. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These
material weaknesses were as follows: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>We did not have an adequate number of personnel in our accounting and finance department with sufficient technical
accounting expertise and, as a result, we could not evaluate in a timely manner the accounting and financial reporting implications of our business transactions. For example, our inventory costing
process was inadequate to produce an appropriate value of cost of revenue and we did not properly manage the accrual process related to cutoffs at the end of reporting periods. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>We did not maintain adequate segregation of duties within the accounting and finance department and, as a result, the
company had an increased risk of fraudulent transactions. For example, we did not have appropriate segregation of duties between transaction origination and account reconciliation. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>We did not design or maintain effective operating control activities or information technology controls over the financial
statement close and reporting process in order to ensure the accurate and timely preparation of financial statements. For example, we did not compare our actual results to our budget and we allowed
individuals to process journal entries without supervisory review and approval. In addition, we had not established information technology control policies and procedures that were sufficient in the
circumstances to support accurate and timely financial information processing. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are in the process of taking necessary steps to remediate the material weaknesses that we have identified. We will continue to review, revise, and improve the design and operating
effectiveness of our internal controls as appropriate. Although we have made enhancements to our control procedures, the material weaknesses will not be remediated until the necessary controls have
been implemented and are operating effectively. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>75</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Remediation efforts  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our remediation efforts for these material weaknesses have included or will include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>hiring of accounting staff and retention of consultants with the critical skill sets to support accurate and timely
financial reporting;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>implementing a financial close schedule;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>identifying activities where staffing size or other factors hinder adequate segregation of duties and either modifying the
duties of the individuals or implementing appropriate monitoring controls to reduce fraud risks to an acceptable level;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>designing and documenting key financial and information technology controls, and developing and implementing processes and
procedures to support these key controls; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>devoting resources to implement additional system functionality that will enhance our ability to establish automated
accounting controls and systematically define segregation of duties. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While
we are in the process of taking necessary steps to remediate the identified material weaknesses, the remediation process will require significant time and resources and we do not
know the specific timeframe required to fully remediate these material weaknesses. Additionally, we will incur both one-time and recurring incremental costs associated with this
remediation process. While we anticipate we will fully remediate these material weaknesses, we cannot assure you we will do so, which could impair our ability to satisfy our SEC reporting
requirements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>76</FONT></P>

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<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

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<BR></FONT><FONT SIZE=2><B>  BUSINESS    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> OUR COMPANY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Company overview  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We design, produce and sell zero emission commercial electric vehicles designed to be a superior performing alternative to traditional
diesel trucks due to higher efficiency and lower total cost of ownership. We believe we are the only vehicle manufacturer selling to major commercial fleets in the United States and Europe that
exclusively produces electric vehicles. Our vehicle designs leverage over 80&nbsp;years of market knowledge from selling and servicing electric vehicles in the United Kingdom. This experience has
led to the development of our advanced powertrain (Smith Drive), power management (Smith Power) and telemetry (Smith Link) technologies. We believe that these technologies will drive improved vehicle
performance, provide us with increased control over supply chain quality and reduce the upfront cost of our vehicles. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unlike
companies that have introduced electric passenger vehicles, we focus on the production and sale of commercial electric vehicles that primarily address the needs of
medium-duty commercial fleet operators with depot-based operations and predictable daily service routes of up to 120 miles. We are the only company focused on producing and globally
offering an all-electric commercial vehicle having a GVW between approximately 16,500 and 26,400 pounds (the Smith Newton). We also produce the Smith Edison, which is a lighter duty
vehicle than the Newton that is sold in the United Kingdom and in other selected markets worldwide. As part of our continued focus on product development, we plan to introduce a Newton model that is
configured as a step van in the United States in early 2012. Our vehicles feature a battery system that is scalable to meet the varying range needs of commercial fleets and that provides a lower total
cost of ownership than that of a conventional diesel vehicle. We believe electric vehicles are ideally suited for the cost conscious commercial vehicles market because: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>lower cost per mile</I></FONT><FONT SIZE=2>&#151;on a per mile basis electric power to
charge our vehicles costs significantly less than diesel fuel;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>less volatility</I></FONT><FONT SIZE=2>&#151;the cost of electricity is considerably less
volatile than the price of diesel fuel;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>less maintenance</I></FONT><FONT SIZE=2>&#151;electric vehicles require less maintenance
than diesel vehicles due to the fewer number of moving parts in an electric powertrain than in a diesel powertrain;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>minimal infrastructure requirements</I></FONT><FONT SIZE=2>&#151;most commercial vehicles
in our target market operate from the same location and follow specific routes, eliminating the need for distributed charging infrastructure and concerns over limited range; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>fuel efficient with low environmental impact</I></FONT><FONT SIZE=2>&#151;commercial fleet
operators are under government and popular pressure to improve fuel mileage, cut emissions and reduce noise associated with diesel powered trucks. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Demand
for our vehicles is growing as customers recognize their economic benefits. Additionally, in the near term we believe that governmental and popular support for companies that
purchase environmentally friendly transportation will accelerate demand for our vehicles. Over the twelve months ended September&nbsp;30, 2011, we sold 320 vehicles, and as of October&nbsp;31,
2011 we have an order backlog of 120 vehicles, representing vehicle revenue of $15.7&nbsp;million, and have allocated nearly all of our estimated 540 production slots through July 2012. In addition
to the 120 vehicles included in our order backlog, we have written indications of interest from existing and potential customers for approximately 2,220 vehicles for requested delivery spanning the
period 2012 through 2015. We are actively involved in discussions with new and existing and potential customers on an ongoing basis and expect to continue to allocate additional production slots and
increase our order backlog. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>77</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
sell our vehicles through our direct sales force, as well as limited third party distribution agreements. We sell our vehicles to commercial fleet operators across multiple industries
including food&nbsp;&amp; beverage, utility, telecommunications, retail, grocery, parcel and postal delivery, school transportation, military and government. Our customers include the following: </FONT></P>
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<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Food&nbsp;&amp; Beverage </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Utilities </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Retail </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Grocery </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Package Delivery </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Military </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><p align=left style="font-family:times;margin-top:0pt;margin-left:20pt;text-indent:-20pt;"><FONT SIZE=2>  </FONT><FONT SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>The Coca-Cola Company  </FONT><FONT SIZE=2> <p align=left
style="font-family:times;margin-top:6pt;margin-left:20pt;text-indent:-20pt;"> </FONT><FONT SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>Frito-Lay North America,&nbsp;Inc.</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-top:0pt;margin-left:20pt;text-indent:-20pt;"><FONT SIZE=2>  </FONT><FONT SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>Kansas City Power&nbsp;&amp; Light</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-top:0pt;margin-left:20pt;text-indent:-20pt;"><FONT SIZE=2>  </FONT><FONT SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>Staples,&nbsp;Inc.  </FONT><FONT SIZE=2> <p align=left
style="font-family:times;margin-top:6pt;margin-left:20pt;text-indent:-20pt;"> </FONT><FONT SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>Duane Reade&nbsp;Inc.</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-top:0pt;margin-left:20pt;text-indent:-20pt;"><FONT SIZE=2>  </FONT><FONT SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>Sainsbury's</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-top:0pt;margin-left:20pt;text-indent:-20pt;"><FONT SIZE=2>  </FONT><FONT SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>DHL  </FONT><FONT SIZE=2> <p align=left
style="font-family:times;margin-top:6pt;margin-left:20pt;text-indent:-20pt;"> </FONT><FONT SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>FedEx  </FONT><FONT SIZE=2> <p align=left style="font-family:times;margin-top:6pt;margin-left:20pt;text-indent:-20pt;">
</FONT><FONT SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>TNT Express</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p align=left style="font-family:times;margin-top:0pt;margin-left:20pt;text-indent:-20pt;"><FONT SIZE=2>  </FONT><FONT SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>U.S. Army  </FONT><FONT SIZE=2> <p align=left
style="font-family:times;margin-top:6pt;margin-left:20pt;text-indent:-20pt;"> </FONT><FONT SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>U.S. Navy  </FONT><FONT SIZE=2> <p align=left
style="font-family:times;margin-top:6pt;margin-left:20pt;text-indent:-20pt;"> </FONT><FONT SIZE=2>&#149;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2>U.S. Marine Corps</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
sales strategy is focused on selling to industry-leading companies and government entities that operate substantial, well-recognized, medium-duty commercial
vehicle fleets and that have the corporate or public commitment and resources to support and sustain the development of the commercial electric vehicle industry. We offer a differentiated approach to
commercial vehicle sales and service that departs from traditional truck sales and service models. Our approach involves a comprehensive plan for the pilot and roll-out of our electric
vehicles, as well as the ongoing replacement of existing commercial vehicles with our electric vehicles, which is tailored to the individual needs of our customers. This plan includes the development
of a multi-year purchasing forecast to help the customer systematically integrate our vehicles into their fleets, as well as analytics that provide the expected economic and environmental
impact of fleet conversion. As a part of this approach, we offer guidance to our customers regarding how to most effectively use and operate their electric vehicles and on integrating electric
vehicles into their existing fleets or transitioning to all-electric vehicle operations. We believe that our strategy of targeting industry-leading companies and providing them with an
individualized sales and service solution has elevated our public profile, enhanced the credibility of our vehicles in the marketplace and made our customers advocates of our sales approach and our
vehicles, all of which enhances our ability to sell vehicles to new customers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a part of our sales strategy, we separately present to our customers the base vehicle price and the battery system price. We believe that, in most cases, our base vehicle price is
competitive with or a slight premium to the price of a diesel-fueled vehicle with a comparable GVW. Our approach to pricing allows customers to compare the relative merits of a diesel truck's low cost
energy storage system (the fuel tank) and more expensive and volatile energy cost (the per gallon price of diesel fuel) with our vehicle's higher cost energy storage system (the battery) and lower and
more predictable energy cost (the per kilowatt hour price of electricity). We believe these comparisons make our vehicles more attractive to customers than traditional diesel options, particularly
during periods of rising fuel prices, even when the social and environmental benefits of our vehicles are ignored. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
currently design, produce and sell vehicles based on two platforms, the Smith Newton and the Smith Edison, both of which can be configured for multiple applications. The Newton has a
GVW of approximately 16,500 to 26,400 pounds, a payload capacity of approximately 6,100 to 16,200 pounds and a range of up to 50 to 150 miles depending on vehicle specification and battery
configuration. The Newton, which is sold in the United States and internationally, is used in a wide range of general delivery applications, as well as in specialty applications such as refrigerated
delivery, military transport and boom truck. In November 2011, less than 24&nbsp;months after the first sale of the Smith Newton in the United States, we introduced a second generation Newton, which
incorporates our Smith Drive, Smith Power and Smith Link technologies. We also are developing a Newton model that will have a GVW of approximately 33,000 pounds to meet the needs of delivery and
transit customers, which we expect to be available in mid-2012. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Smith Edison, which is a lighter duty vehicle than the Newton, is sold in the United Kingdom and in other selected markets worldwide. The Edison has a GVW of approximately 7,700 to
10,100 </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>78</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>pounds,
a payload capacity of approximately 1,600 to 5,100 pounds and a range of up to 55 to 110 miles depending on vehicle specification and battery configuration. The Edison is used in a wide range
of service and delivery applications, as well as specialty applications such as refrigerated delivery, utility boom and shuttle service. We intend to continue to develop and introduce a next
generation Smith Edison that utilizes our Smith Drive, Smith Power and Smith Link technologies. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also are developing and plan to introduce in early 2012 a Newton model that is configured as a step van. We expect this model will have a GVW of approximately 14,000 to 22,000 pounds,
a payload capacity of approximately 2,700 to 10,000 pounds and a range of up to 40 to 120 miles depending on battery configuration. We expect the vehicle will be used primarily for delivery of
parcels, uniforms and baked goods. The Newton step van will utilize our Smith Drive, Smith Power and Smith Link technologies. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
production operations leverage our supply chain of component manufacturers and allow us to focus on vehicle assembly. This focus contributes to our low capital expenditure
requirements and rapidly scalable capacity, and makes our decentralized production strategy financially advantageous. To continue to drive and sustain the economic advantage of our vehicles over
diesel trucks, we are working
to reduce our materials, operating and production costs, which we expect will reduce the prices of our vehicles and improve our gross margin. We have implemented a three-phased approach to reducing
costs, which we refer to as our "cost down" initiative, which we believe will help us achieve these goals. The first phase was focused on transitioning our supply chain from low volume suppliers to a
medium-volume automotive-grade supply chain. The second phase involves the transition from battery and powertrain systems produced by third party suppliers to our Smith Power and Smith Drive systems
and the implementation of multi-source volume purchasing strategies. The third phase will involve the transition of the supply chain for our ancillary components to higher-volume and lower-cost
suppliers. We expect to complete all three phases of our current cost down initiative in the first half of 2012. Thereafter, we expect to pursue continuous improvements in our supply chain and vehicle
production costs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have one production, research and development, sales and service facility in Kansas City, Missouri and one outside of Newcastle, England. To execute on our decentralized production
strategy, we plan to open sales, service and assembly facilities in targeted urban areas in the United States and abroad, beginning with facilities on the east and west coasts of the United States. We
expect to open the first of these facilities in New York City in the first half of 2012. We also have an established service base in the United Kingdom, where we operate four service facilities and a
fleet of approximately 100 service vehicles. Our U.K. service teams maintain both electric and traditional diesel vehicles. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith
Europe and its predecessor entities have existed since the early 1920s. We were incorporated in Delaware in 2009 and have been operating on a consolidated basis with Smith Europe
since January 2011, when we acquired the business of Smith UK. Our corporate headquarters are located in Kansas City, Missouri. We began selling the Smith Newton in the United States in December 2009
and, as of September&nbsp;30, 2011, have sold 283 vehicles in the United States. Between January&nbsp;1, 2008 and September&nbsp;30, 2011, we sold an additional 272 vehicles outside of the U.S.
We have approximately 280 employees worldwide. Our revenue for our fiscal years 2008, 2009 and 2010 and the six months ended June&nbsp;30, 2011 was $32.4&nbsp;million, $22.9&nbsp;million,
$35.6&nbsp;million and $37.6&nbsp;million, respectively. Our revenue consisted of $14.2&nbsp;million in vehicle revenue and $18.2&nbsp;million in service and repairs revenue for 2008;
$8.2&nbsp;million in vehicle revenue and $14.6&nbsp;million in service and repairs revenue for 2009; $23.8&nbsp;million in vehicle revenue and $11.8&nbsp;million in service and repairs revenue
for 2010; and $31.9&nbsp;million in vehicle revenue and $5.7&nbsp;million in service and repairs revenue for the six months ended June&nbsp;30, 2011. Our revenue has grown from
$15.8&nbsp;million for the six months ended June&nbsp;30, 2010 to $37.6&nbsp;million for the six months ended June&nbsp;30, 2011. We operate our business in two reportable segments:
(i)&nbsp;Zero Emission Vehicles and (ii)&nbsp;Maintenance Services. See Note&nbsp;16, </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>"Information
about Segments and Geographic Areas" to the combined and consolidated financial statements included elsewhere in this prospectus for information about our revenues on a segment basis and
our revenues from the geographic areas in which we sell our vehicles. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Smith UK acquisition  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith Europe consists primarily of the Smith UK business we acquired from Tanfield effective January&nbsp;1, 2011. We believe our
acquisition of the Smith UK business provides us with: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a platform on which we can expand our business internationally, particularly in Europe and Asia, where fuel costs exceed
those in the United States;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>enhanced product development capabilities as a result of access to Smith UK's engineering division; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>access to recurring service-related revenues from Smith UK's fleet management services; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Smith UK's existing vehicle technologies and the elimination of a royalty obligation to Tanfield. Prior to our acquisition
of Smith UK, Tanfield licensed to us the exclusive right to develop, test, manufacture, market, distribute, sell and service electric vehicles in North America under Tanfield's electric vehicle
intellectual property (other than trade and service marks). See "Relationships and Related Person Transactions&#151;Tanfield Transactions" for additional information about this license
agreement. Smith Europe now owns the intellectual property rights we previously licensed from Tanfield. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> OUR MARKET OPPORTUNITY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Medium-duty commercial vehicle market overview  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary market is commercial fleet purchasers of medium-duty vehicles, which are on-road vehicles with GVWs
ranging from 14,000 to 33,000 pounds. Medium-duty commercial vehicles are used in, among other things, urban applications such as grocery, package and beverage delivery, utility, and
school and shuttle buses. According to J.D. Power and Associates (Q3, 2011 Medium Duty World Truck Sales), global annual sales of on-highway medium-duty commercial trucks are
expected to reach 822,197 units in 2011, with a CAGR of 3.3% from 2011 to 2016. Based on our calculations, this equates to greater than a $40&nbsp;billion total available market for these vehicles
worldwide. In relation to the </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>80</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>overall
commercial vehicle market, the medium-duty commercial vehicle segment represents a niche opportunity for many traditional large-scale OEMs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>
<IMG SRC="g937933.jpg" ALT="GRAPHIC" WIDTH="625" HEIGHT="279">
  </B></FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>Source:
J.D. Power and Associates Global Commercial Vehicles Forecast published September&nbsp;30, 2011 </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According
to Fleet Owner Magazine, medium-duty fleet operators have an estimated current installed base of 1.2&nbsp;million vehicles in the United States. The primary
drivers impacting the purchase of these fleets are macroeconomic growth, industrial activity, fuel and maintenance costs and government spending. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Opportunity for commercial electric vehicles  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is our belief that the traditional medium-duty commercial vehicle market is plagued with industry-wide
challenges that incumbent vehicle manufacturers will struggle to address. Incumbent vehicle manufacturers' reliance on diesel-fueled engines as their principal powertrain technology has raised
environmental concerns and created dependence on oil largely imported from foreign nations, which has led to increased regulation, and has exposed fleet owners to fuel price volatility and significant
operating costs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that shifting preferences among commercial vehicle fleet buyers together with increasing government regulation and available government incentives will result in significant
growth in the market for commercial grade electric vehicles, especially in our targeted market. We believe many fleet buyers are increasingly willing to consider purchasing electric vehicles due to
the economic, environmental, regulatory and national security consequences of using gasoline and diesel-powered vehicles, as well as the performance and cost characteristics exhibited by recently
developed, alternative vehicles. We also believe government regulations and incentives are accelerating the growth of the commercial electric vehicle market. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
medium-duty fleet market represents an opportune target market for us, as we believe vehicles in this segment are often operated within urban centers, are driven at
speeds below 50 mph and utilize depot-based routes with predictable distances, typically 50 to 100 miles per day. Additionally, fleet owners tend to maintain a large number of vehicles, typically
purchase in volume, and can leverage economies of scale in the operation and servicing of such vehicles. Fleet size varies depending on the company, but large consumer products and package delivery
companies such as Frito-Lay, Coca-Cola and FedEx have fleets in excess of 20,000 vehicles, with an average service life of eight years. As a result, fleet owners place
significant importance on total cost of ownership, which </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>includes
a vehicle's upfront cost as well as ongoing operating costs such as fuel and maintenance, and is where electric vehicles provide considerable advantages over both diesel-fueled and hybrid
vehicles. Fuel, oil, service and maintenance represent material operating expenditures for commercial fleet owners. Commercial electric vehicles eliminate the need for ongoing fuel and oil consumption
and the lower number of overall parts in an electric vehicle reduces the amount of service and maintenance necessary to operate the fleet. According to J.D. Power and Associates, on average, gasoline
and diesel trucks in this category have a fuel economy of approximately 8.4 miles per gallon. We estimate that diesel trucks in this category cost between $0.15 and $0.23 per mile to maintain. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Worldwide,
governments are offering subsidies and incentives helping accelerate the adoption of commercial electric vehicles. For example, in the United States, the DOE's Clean Cities
program and the EPA's National Clean Diesel Funding Assistance Program provide purchasers of electric vehicles
with subsidies and incentives and under the Obama administration's Green Fleet Initiative, by 2015 all new vehicles purchased for America's federal agencies will be electric, gas-electric
hybrid, or alternatively fueled. See "&#151;Governmental Programs and Incentives." In Europe, the European Union has passed more restrictive vehicle emissions standards, several countries have
instituted direct subsidies and significant tax exemptions for electric vehicles and some cities exempt electric vehicles from congestion charges. In Asia, the Chinese government has established a
pilot program that provides subsidies to purchasers of electric vehicles as well as subsidies for infrastructure installation. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Challenges facing incumbent vehicle manufacturers  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incumbent vehicle manufacturers face significant challenges in continuing to meet the needs of customers in our target market. These
challenges include having to redesign vehicles in order to meet newly enacted and proposed environmental and safety regulations and the following: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Dependence on diesel powertrains.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;While a limited number
of manufacturers have invested in a plug-in electric vehicle program, we believe a majority of incumbent commercial vehicle manufacturers continue to emphasize investment in diesel engine
technologies over investment in fully electric technologies because of their need to support their existing revenue base and core competencies.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Limited electric powertrain expertise.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;To date, incumbent
commercial vehicle manufacturers have pursued multiple fuel technologies, including hydrogen fuel cell, hybrid and electric powertrain technologies. We believe that exploring such a diverse range of
programs while simultaneously continuing to invest in legacy diesel engine platforms has to date inhibited their ability to focus on a specific alternative fuel powertrain technology. As a result, we
believe incumbent commercial vehicle manufacturers currently have relatively limited electric powertrain expertise, especially with respect to sophisticated battery cooling, power, safety and
management systems.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Significant re-engineering and new product
development.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;New product launches by incumbent vehicle manufacturers historically have required significant capital investments and
lengthy time periods between initial development and production. We believe the development process for an electric vehicle program could be particularly expensive for incumbent vehicle manufacturers
given their need to develop an entirely new powertrain and the sophisticated battery cooling, power, safety and management systems necessary to support such a program. Additionally, manufacturers of
commercial electric vehicles must produce vehicles of sufficient grade, weight and capability to service the needs of a diverse range of end markets, such as the food and beverage, military, parcel
delivery, utilities and commuter transport markets. These diverse needs historically have added complexities for manufacturers of diesel-fueled vehicles and further complicate engineering for those
designing vehicles with new technologies, such as all-electric powertrains. </FONT></DD></DL>
</UL>
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<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Lack of robust supply chain for medium-duty electric
vehicles.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The medium-duty commercial vehicle market represents a niche market to several traditional large scale OEMs, some
of which have exited the market entirely over the last several years. This limited emphasis on medium-duty commercial vehicles has made it more difficult to develop and mature the supply
chain in the electric vehicle market.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Inability to scale production as a result of high upfront cost of
vehicles.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The relatively high initial cost of commercial electric vehicles has limited adoption, resulting in a lack of meaningful
production volumes and manufacturers' inability to increase capacity to recognize substantial cost reductions. Expensive battery technology and powertrain components combined with early stage
production ramps have limited vehicle manufacturers' ability to reduce costs and deliver a competitively priced option to market. While the fuel and maintenance cost advantages of electric vehicles
remain compelling, high upfront costs and low volumes have limited vehicle sales to early market entrants. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> OUR COMPETITIVE STRENGTHS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that focusing our business model on developing and integrating advanced vehicle technologies, manufacturing vehicles using a
decentralized, low cost
assembly strategy, and establishing a base of customer advocates that can accelerate the development of the commercial electric vehicle industry, distinguishes us from our competitors and will assist
us in maintaining our leadership position in the medium-duty commercial electric vehicle market. We believe that this focus and the following strengths position us well to capitalize on
the expected growth in demand for medium-duty electric commercial vehicles: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Focus on commercial electric vehicles.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We believe that
adoption of electric vehicles will be fastest in commercial applications where the economic benefits are greatest, and which have predictable routes and centralized charging, thereby avoiding range
anxiety and dependence on development of public infrastructure to support electric vehicle fleets. We believe our position as a leading provider of commercial electric vehicles enables us to benefit
from this trend.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>First mover with established major commercial fleet relationships in the United States, Europe and
Asia.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We believe we are the only vehicle manufacturer selling to major commercial fleets in the United States and Europe that
exclusively produces electric vehicles. We have sold trucks to and are currently negotiating additional orders with customers such as Staples, Frito Lay/PepsiCo, Coca-Cola, TNT Express and
DHL, some of which are among the largest purchasers of medium-duty trucks in the world. We believe that our established relationships with large customers position us to receive additional
orders from them, which will increase the recognition of our products with prospective customers and reinforce our brand equity.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Proven ability to reduce the cost of our vehicles.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We
believe that wider adoption of commercial electric vehicles can be achieved by reducing their cost. We believe our component sourcing strategy coupled with our engineering expertise will allow us to
continue to reduce the cost of our vehicles and increase their attractiveness to customers.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Low capital intensity of production.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We believe our
ability to achieve a relatively low level of capital intensity with respect to our production operations will enable us to expand more rapidly and deliver high returns on invested capital. We assemble
our vehicles using components manufactured by pre-qualified third party vendors using our specifications and designs. By purchasing components and focusing on assembly, we are able to
leverage medium-volume automotive-grade suppliers who have already achieved economies of scale, allowing us to avoid significant fixed costs and capital investment. </FONT></DD></DL>
</UL>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Our vehicle and system design facilitates component-based cost reduction and protection of our trade secrets and
know-how.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We believe our component-based approach allows us to achieve lower costs when compared to buying entire systems,
which typically carry higher margins for suppliers, and more easily and fairly fosters competition among multiple suppliers, as greater sourcing options exist for components as compared to systems.
For example, our recently introduced Smith Power battery management system allows us to purchase battery modules, rather than entire battery systems, and over time we expect to purchase battery cells
and assemble our own battery modules into packs, thereby further reducing our costs. Our powertrain provides us the ability to purchase at either a system or component level, such that we are able to
purchase motors, inverters, controllers and transmissions separately from suppliers. Our approach also allows us to continuously develop our intellectual property and to better protect our trade
secrets and know-how because no one supplier has access to our complete system design.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Modular battery system design that allows customers to configure each truck's range based on its application and
significantly impact the total cost of vehicle operation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We have designed our battery system to be modular so the same vehicle can
accept battery packs with different capacities. For example, the Smith Newton has multiple battery pack options depending on the customer's range requirements and duty cycle. The flexibility to
correctly size each vehicle's battery pack allows customers to select the most cost effective solution for their particular application, with the option to add additional capacity in order to
repurpose vehicles for new applications in the future. Together, we believe these options allow our customer to maximize each vehicle's economic return, thereby increasing the attractiveness of our
vehicles.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Focus on medium-duty commercial vehicles positions us well to avoid direct competition with
heavy-duty truck and light-duty automotive OEMs.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Incumbent heavy-duty truck manufacturers and
light-duty automotive OEMs&nbsp;generally are not as focused as we are on sales of medium-duty trucks due to the relatively limited sales volume opportunity. We believe that
as an early entrant with exclusive focus on medium-duty vehicles, we are well positioned to avoid direct competition with the much larger organizations that produce heavy- and
light-duty trucks. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> OUR STRATEGY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to be a leading global producer of medium-duty commercial electric vehicles. Key elements of our strategy
include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Focusing on large, well-recognized commercial operators to establish long-term customer
advocates.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We are focusing our sales efforts on industry-leading companies and government entities that operate substantial,
well-recognized, medium-duty commercial vehicle fleets. These entities have not only the resources available to purchase our vehicles, but also the corporate or public
commitment to support and sustain the development of the commercial electric vehicle industry. We believe this strategy will increase our sales and provide us with market credibility. Additionally,
these customers typically have well-defined fleet replacement strategies that strengthen our visibility with respect to customers' purchasing cycles and future supply needs. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Leveraging our existing vehicle technologies and platforms to diversify applications and sales
channels.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We are leveraging our current vehicle technologies and platforms to diversify applications in both the United States and
Europe. We anticipate these new vehicle models will broaden our reach within our addressable market and result in increased sales to our existing customers. In addition to offering vehicles with a
wider range of GVWs, we are working with several truck and bus body manufacturers to provide specialized vehicles, including a step van, shuttle and school buses, aircraft ground service and military
transportation. These relationships will not only allow us to offer specialized models to our commercial fleet customers, but also could open new sales channels for us, as these manufacturers also may
purchase our vehicles for </FONT></DD></DL>
</UL>
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<P style="font-family:times;"><FONT SIZE=2>resale
to the end users. For example, in October 2011, Trans Tech Bus, a division of Transportation Collaborative&nbsp;Inc., unveiled its Newton eTrans electric Type-A school bus
prototype, which is based on the Newton platform.  </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Continuing to focus on technological innovation to reduce the initial cost of our
vehicles.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We are focused on improving our vehicle technologies and broadening our proprietary intellectual property rights over systems
and components incorporated into our vehicles. These strategies are intended to improve our vehicle performance and reliability, strengthen our competitive position and lower our vehicle costs. For
example, our recently introduced Smith Power battery management system allows us to purchase battery modules, and ultimately will allow us to purchase lithium-ion cells, from various
pre-qualified manufacturers. We expect that this ability to source from multiple suppliers will enable us to reduce the cost per kilowatt hour of the batteries used in our vehicles and
improve reliability.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Establishing sales, service and assembly facilities in selected local
markets.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We intend to establish sales, service and assembly facilities in select urban areas in different regions of the United States
and abroad. Our initial plans include opening facilities on the east and west coasts of the United States, including a facility in New York City, which we anticipate will open in the first half of
2012. In addition to increasing our production capacity, these new facilities will allow us to provide localized sales and service and will significantly reduce costs associated with shipping
completed trucks from our existing U.S. and U.K. locations to our customers.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Supporting and leveraging our customers' brands through branding synergies and
co-promotions.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We intend to continue helping our customers build and achieve corporate sustainability objectives and enhance
their brand images. Our efforts include co-promotional media and joint presentations at industry conferences and other public events that highlight the ongoing replacement of our
customers' legacy diesel fleets with our environmentally-friendly, 100% electric vehicles.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Providing customized battery acquisition models to our
customers.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We intend to provide purchasing options for the battery system used in our vehicles that meet our customers' varying
purchasing strategies. For example, we intend to provide our customers with the flexibility to purchase complete vehicles that include battery systems or to purchase base vehicles and separately
acquire battery systems through leasing arrangements with third parties. In the future we may offer battery leasing arrangements to our customers.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Working with federal and state governments to promote the electric vehicle
industry.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;We work with government authorities to promote the adoption of electric vehicles and believe we are
well-positioned to benefit from support for commercial electric vehicles. Government support for the development and use of commercial electric vehicles can accelerate their adoption. Such
support ranges from tax incentives, to end-user rebates for the purchase of electric vehicles, to consortium tenders for the purchase of electric vehicles in volume. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> OUR VEHICLES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary business is the development, production, sale and service of zero emission commercial electric vehicles. We aim to produce
commercial vehicles that are robust, economical and easy to drive. We currently produce and sell vehicles based on two platforms, the Smith Newton and the Smith Edison, both of which can be configured
for multiple applications. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Smith Newton  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Smith Newton is designed for predictable route, depot-based applications and is used in a wide range of general delivery
applications, as well as in specialty applications such as refrigerated </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>delivery,
military transport and boom truck. The Newton has a GVW of approximately 16,500 to 26,400 pounds, a payload capacity of approximately 6,100 to 16,200 pounds and a range of up to 50 to 150
miles depending on vehicle specification and battery configuration. We produce and sell the Smith Newton in the United States and in the United Kingdom for use in the medium-duty
commercial vehicle market, and our vehicles currently are in use in the food&nbsp;&amp; beverage delivery, utility, telecommunications, retail, office products, grocery, parcel delivery, school
transportation, military and government, facilities management and airport operations sectors. Additionally, the Smith Newton is the only all-electric commercial vehicle in the 21,000 to
28,000 pound GVW range on the United States Government Services Administration schedule, which provides a streamlined procurement process for federal customers wishing to purchase vehicles from us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Smith Newton is designed as a chassis cab and can be configured with: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a flat bed,  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a cargo box,  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>an electric boom for utility work that includes ancillary power options,  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a refrigeration unit that provides a cooled compartment, and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>transit, shuttle, or school bus seating. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Smith Newton battery system generally requires six to eight hours to fully recharge using a 240-volt power source and is available in the following five configurations to meet our
customers' maximum range and economic needs: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>40 kilowatt hour, which provides a range of up to 50 miles on a single charge;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>60 kilowatt hour, which provides a range of up to 70 miles on a single charge;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>80 kilowatt hour, which provides a range of up to 90 miles on a single charge;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>100 kilowatt hour, which provides a range of up to 110 miles on a single charge; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>120 kilowatt hour, which provides a range of up to 150 miles on a single charge. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
plan to introduce a Newton model that is configured as a step van and incorporates our Smith Drive, Smith Power and Smith Link technologies in early 2012. We expect this model to have
a GVW of approximately 14,000 to 22,000 pounds, a payload capacity of approximately 2,700 to 10,000 pounds and a range of up to 40 to 120 miles depending on battery configuration. We expect the
vehicle will be used primarily for delivery of parcels, uniforms and baked goods. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also are developing a Newton model that will have a GVW of approximately 33,000 pounds to meet the needs of delivery and transit customers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Smith Edison  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Smith Edison is used in a wide range of service and delivery applications, as well as specialty applications such as refrigerated
delivery, utility boom and shuttle service. The Edison has a GVW of approximately 7,700 to 10,100 pounds, a payload capacity of approximately 1,600 to 5,100 pounds and a range of up to 55 to 110 miles
depending on vehicle specification and battery configuration. We currently produce and sell the Smith Edison only through Smith Europe, although in the future we plan to introduce in selected
international markets a second generation Smith Edison that incorporates our Smith Drive, Smith Power and Smith Link technologies to address customers' needs for a smaller commercial electric vehicle
than the Smith Newton. The Smith Edison currently is in use in the postal and parcel delivery, logistics, facilities management, grocery, utility, airport operations and government sectors. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>86</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Smith Edison utilizes a Ford Transit chassis and is available from us as a chassis cab, panel van or 12 to 17 seat minibus. The Edison chassis cab has a 40 kilowatt hour battery
system, which provides a range of up to 60 miles on a single charge. The Edison panel van and minibus are available with 36
and 50 kilowatt hour battery systems, which provide ranges of up to 60 miles and 110 miles, respectively, on a single charge. The Smith Edison battery system generally requires six to eight hours to
fully recharge using a 240-volt power source and we also offer a four hour fast-charging option. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> OUR TECHNOLOGY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our research and development efforts are focused on improving our existing vehicle technologies to improve vehicle performance and
reduce cost. As of September&nbsp;30, 2011, we have 36 employees engaged primarily in vehicle engineering and development activities. While we undertake a number of research and development
activities on various aspects of our vehicles' performance, we have focused our research and development efforts on our Smith Drive, Smith Power and Smith Link technologies. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Smith Drive  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith Drive is our physical vehicle drive and control system, which features a configurable drive controller with integrated inverters
for the management of auxiliary systems; permanent magnet motors, which increase motor efficiency; and an integrated control protocol with Smith Power that supports a common diagnostic interface.
Beginning in November 2011, we include this technology in all new vehicles we produce in the United States. We anticipate including this technology in all new Smith Newtons we produce in the United
Kingdom beginning in the first half of 2012. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Smith Power and existing battery technology  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith Power is our battery system, which provides: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a battery management system with the capability to manage power at the battery cell level;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a pack integration strategy that facilitates the use of battery cells of varying sizes from different manufacturers; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>active thermal management at the battery cell level;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the flexibility to allow for battery packs having varying energy storage capacities to meet specific vehicle applications;
and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>an integrated control protocol with Smith Drive. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have designed our Smith Power system to permit flexibility with respect to battery cell chemistry, form factor and vendor that we adopt for battery cell supply. We maintain a database
of the many available lithium-ion cell vendors and chemistry types. We intend to incorporate into our battery systems the battery cells that provide the best value and performance, and we
expect this to continue over time as battery cells continue to improve in energy storage capacity, longevity, power delivery and cost. We believe this flexibility will enable us to continue to
evaluate new battery cells as they become commercially viable, and thereby optimize battery pack system performance and cost for our current and future vehicles. We believe our ability to change
battery cell chemistries and vendors while retaining our existing investments in software, electronics, testing and vehicle packaging, will enable us to quickly deploy various battery cells into our
products and leverage the latest advancements in battery cell technology. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning
in November 2011, we include our Smith Power technology in all new vehicles we produce in the United States. We anticipate including this technology in all new Smith Newtons we
produce in the United Kingdom beginning in the first half of 2012. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>87</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The battery technology and control mechanisms we currently use in our vehicles are designed to monitor, measure and control battery cells to prevent rapid
releases of the energy contained in the cells. The power system we currently use in our U.K.-produced vehicles and our Smith Power technology are based on a chemistry selected for its stability, and
the cells incorporated into these systems contain current separation mechanisms and venting technologies that passively contain any single cell's release of energy, which minimizes the spread of
energy to neighboring cells. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
batteries installed in our vehicles generally require six to eight hours to fully recharge using a 240-volt power source. The charging duration is proportional to the starting state
of charge, which is the amount of unused battery capacity at the time charging begins. Factors that affect the amount of time needed to recharge the battery include the size of the battery, the
available power source for the charger at the charge location and the size of the charger. We align the size of the charger installed in our vehicles to the customer's chosen battery pack size in
order to limit the required charging time to six to eight hours using a 240-volt power source. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Smith Link  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith Link is an onboard system that monitors and transmits the vehicle's vital statistics by general packet radio service (GPRS) to a
central server, allowing remote vehicle monitoring, diagnostics and reporting. Smith Link eliminates reactive service calls with effective, real time data, diagnostics and performance information,
which allows for more efficient fleet management. The operational data collected by Smith Link also supports continuous vehicle development and improvements. We install Smith Link in all of the
vehicles we produce. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith
Link provides: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>fleet operators the ability to: (i)&nbsp;monitor the location and previous routes of their vehicles, (ii)&nbsp;analyze
the performance of their vehicles on a daily basis, (iii)&nbsp;proactively manage service, which reduces vehicle down time, (iv)&nbsp;better educate drivers about the performance of their vehicles
and (v)&nbsp;calculate and track return on investment and carbon emissions.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our service technicians the ability to remotely monitor customer fleets and individual vehicle systems to identify
possible future system issues, and remotely diagnose vehicle system faults and identify faulty components.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our engineering department the ability to identify failure modes and collect vehicle data that supports continuous
technology improvement. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have established a data warehousing platform to maintain the information collected by Smith Link, which will allow us to carefully analyze vehicle performance over time in order to
improve our technologies and help our customers maximize the productivity of their electric vehicles. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> MANUFACTURING  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Vehicle assembly  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently assemble the vehicles we sell in the United States and Canada in our Kansas City, Missouri production facility. We
assemble the vehicles we sell in the rest of the world in our production facility located outside of Newcastle, England. Our Kansas City production facility is an approximately 85,100 square foot
repurposed facility located at the Kansas City International Airport. We currently have in place in this facility two production lines configured to produce a total of 100 vehicles per month operating
on a single production shift, assuming the timely availability of components. We are currently working with vendors in our supply chain to increase their capacity so that we may ramp to this
production level by mid-2012. Our U.K. production facility is an 80,000 square foot facility located outside of Newcastle, England. Historically we have produced at an average rate of approximately </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>88</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>seven
vehicles per month in this facility, which we plan to increase to approximately 14 vehicles per month beginning in 2012. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that we will be able to increase the production rates at our existing production facilities through improvements in our assembly process and adding additional shifts. Long
term, however, we intend to expand our vehicle assembly operations through our network of sales, service and assembly facilities, rather than significantly increasing the production capabilities of
our existing facilities. Once a sales, service and assembly facility is open in a geographic market, vehicle assembly for sales made in that geographic market generally would be performed at that
facility. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
commercial electric vehicles are designed and assembled on what we refer to as a systems basis, which means that our assembly line is configured to facilitate vehicle assembly system
by system. Our assembly process consists of configuring an existing vehicle body and rolling chassis with the following systems: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the powertrain, which consists of the motor, transmission, inverter, gearbox and controller;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the battery system;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>high voltage ancillary components, such as power steering, coolant and air conditioning;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a low level coolant energy recovery system; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>central control systems that use a dedicated electronic vehicle module to control the vehicle's high voltage ancillary
components and regenerative braking, as well as vehicle-based items such as stability and traction control. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that our systems-based approach to vehicle assembly allows us to be responsive to customer requirements, vehicle duty cycles and our customers' individual subsystem
specifications to ensure that energy efficiency is optimized while costs are minimized. Furthermore, we believe that our design and assembly process results in a vehicle that has the appearance and
familiarity of an internal combustion vehicle with the economy and user appeal of an all-electric vehicle. We believe that this approach maintains operator familiarity and thereby
accelerates the adoption of electric vehicle technology. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
assembly process leaves intact the vehicle's existing electrical system and all base vehicle functionality, but provides enhancements that optimize energy usage. For example, the
vehicle's brakes remain completely unchanged except for the addition of an electric pneumatic pump that allows for braking powered by our installed battery pack. All built-in safety
features on the base vehicle continue to comply with applicable regulatory requirements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assembly
of the Smith Edison differs somewhat from assembly of the Newton. We also assemble the Edison on a systems basis, however, unlike the Newton, where we begin the assembly process
with an unpowered cab and chassis, we begin assembly of the Edison with a complete Ford Transit vehicle. We remove the traditional powertrain and powered components of the vehicle and replace them
with our electric components. We then return the unused traditional vehicle components to Ford in exchange for price discounts on the purchased vehicle. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Supply chain  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our production operations depend on obtaining systems, components, raw materials, parts, manufacturing equipment and other supplies and
services from reliable suppliers in adequate quality and quantity in a timely manner. Our current supply chain is located globally, with approximately 31% of our suppliers located in North America and
68% located in Europe. See "&#151;Key Suppliers" for information regarding our relationships with our significant system and component suppliers. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
obtain components and raw materials from multiple sources whenever possible, similar to other vehicle manufacturers, however, certain of our primary vehicle systems and the components
and raw </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>materials
used in our vehicles are purchased by us from a single source. We refer to these suppliers as our sole source suppliers. For example, we source the over 530 parts that comprise the
U.S.-produced Smith Newton from over 35 suppliers, including 22 sole source suppliers. We generally purchase materials pursuant to purchase orders placed from time to time and have a limited number of
long-term contracts or other guaranteed supply arrangements with our sole or limited source suppliers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also are subject to fluctuations in the prices of the components and raw materials we use in our business as a result of our practice of purchasing systems, components and raw
materials through purchase orders. Prices for the systems, components and raw materials we use in our business fluctuate depending on market conditions and global demand. We believe that we have
adequate supplies or sources of availability of the systems, components and raw materials necessary to meet our production and supply requirements. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are implementing enterprise resource planning and management software to automate and improve our procurement and inventory processes and integrate them with our financial accounting
and business planning. We plan additional investment in our management systems to support further growth in our operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with our cost down initiative and transition to our Smith Power and Smith Drive systems, we have moved to a new supply chain, including suppliers with which we have limited
or no prior experience. While we experienced disruptions in our supply chain during the transition, over the long term, we do not believe the transition or any associated disruption will materially
and adversely affected our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Quality control  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our quality control efforts are divided between product quality and supplier quality, both of which are focused on designing and
producing products and processes with high levels of reliability. We have four dedicated quality control employees that work with our engineering team and our suppliers to help ensure that the product
designs meet functional specifications and durability requirements. Our quality control employees also work with our suppliers to ensure that their processes and systems are capable of delivering the
parts and components we need at the required quality level, on time, and on budget. Smith Europe received its ISO&nbsp;9001 certification in August 2011. We are currently working to meet the
requirements for ISO certification for our U.S. operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Warranty policies  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sell our vehicles with standard component-based warranties under which each vehicle component is covered for a specific period of
time. The powertrain, cab and chassis are covered for 36&nbsp;months, the air conditioning system and the low voltage batteries that operate ancillary systems in the vehicle are covered for
12&nbsp;months and the primary battery system is covered for 60&nbsp;months from the date on which we release the vehicle for shipment, in each case, subject to certain exclusions and exceptions.
See "&#151;Key Suppliers" for information about the warranty terms provided by our suppliers for our key systems and components. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> MAINTENANCE, SERVICE AND OTHER  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide maintenance services for traditional diesel-fueled vehicle fleets and, as part of our legacy Smith UK business, distribute
forklifts for warehouse use through Smith Europe. From time to time we also may enter into agreements to retrofit customers' existing vehicle fleets by replacing traditional truck components with our
electric components. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After
sale, we generally maintain and service our customers' vehicles. Through Smith Europe, we also provide fleet maintenance services to operators of traditional diesel-fueled vehicle
fleets. This fleet maintenance business generated $11.7&nbsp;million in revenue in 2010 for Smith UK. We believe that our </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>fleet
maintenance business provides us with consistent cash flows and with opportunities to market our commercial electric vehicles to our fleet maintenance customers. We enter into fleet maintenance
contracts with certain of our customers under which we provide maintenance and repair services at rates that are agreed upon at the time we enter into the contract. These contracts typically are for
six-month periods. We also offer service-for-fee arrangements for services not covered under a fleet maintenance contract or under warranty, which are priced at the
time such services are provided. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to our facility located outside of Newcastle, England, we have four service facilities and a fleet of approximately 100 service vehicles throughout the United Kingdom that
maintain our customers vehicles. We currently service the commercial electric vehicles we have sold in the United States by sending technicians from our Kansas City, Missouri facility to the
customer's location. Services not covered under warranty are contracted for on an as needed basis and are priced at that time. Once we have established a sales, service and assembly facility in a
geographic area, that facility will be responsible for servicing the Smith vehicles operating in that area. We do not, however, expect to open sales, service and assembly facilities in all of the
geographic areas in which our existing and potential customers may operate our vehicles. In order to address the service needs of customers that are not in close geographic proximity to a sales,
service and assembly facility, we plan to deploy technicians from our closest facility to service the vehicles at the customer's location. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> KEY SUPPLIERS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our key suppliers and, where applicable, descriptions of our supply agreements with our key suppliers, follows. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Key suppliers with supply agreements  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> A123 Systems,&nbsp;Inc.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since June 2011 we have purchased lithium-ion battery modules from A123 under a product sales agreement that became
effective in March 2011. Although we currently purchase five kilowatt hour modules, under the product sales agreement, we have the option to instead purchase battery cells which we can then package
into modules of varying sizes. We are entitled to volume purchasing discounts on battery modules and cells we purchase under the agreement and pricing terms have been established through 2013. A123
provides us with a 48-month warranty period on products it supplies to us, which can be extended for an additional two year period of more limited warranty coverage. The agreement does not
otherwise have a stated term. A123 has a right of first refusal under the agreement to supply us with certain annual volume requirements and has committed to supply us with a specified minimum number
of battery modules or cells determined based on rolling 12-month forecasts. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> Avia Ashok Leyland Motors S.R.O.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Avia supplies the chassis and cab on which our Smith Newton platform is based. We purchase the chassis and cab and related components
for the Smith Newton exclusively from Avia under a supply agreement we entered into in October 2010 that covers the United States, Canada and Mexico. We purchase the chassis and cab for Smith Newton
vehicles produced in the United Kingdom from Avia under purchase orders. The supply agreement has an initial five-year term, which may be extended for an additional five years upon mutual
agreement of the parties. Under the supply agreement, Avia granted us the exclusive right to sell and market Avia's products within the electric vehicle market in the United States, Canada and Mexico,
subject to minimum purchase requirements. It is likely that we will not meet the minimum purchase requirements for 2011, and, as a result, Avia will become a non-exclusive supplier in
2012. </FONT><FONT SIZE=2><I>See</I></FONT><FONT SIZE=2> "Risk Factors&#151;Our business, prospects, financial condition and operating results could be adversely affected if we lose our
exclusive rights to Avia chassis and cabs in North America." Avia also has granted us the right to assemble chassis in the United States for use with Avia's cab. If we exercise this right, Avia will
work with us to provide us the rights to the </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>know-how
and design technology required for production. Pricing under the agreement is established annually and our engineering and procurement departments work closely to reduce the
manufacturing and assembly costs of Avia's products. Additionally, we act as Avia's exclusive master spare-parts and service parts distributor for electric vehicle parts to our customers in the United
States, Canada and Mexico. We have branding rights over all products purchased from Avia for use in the electric vehicle market in the United States, Canada and Mexico. Avia provides us with an
eight-year anti-corrosion warranty on the cabs, a two-year warranty on axles and a one-year warranty on all other parts supplied to us, subject, in the
case of parts supplied to us, to certain exceptions for ordinary wear and tear. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Ford Motor Company  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ford supplies the Transit vehicles on which our Smith Edison platform is based. Our purchases of Ford Transit vehicles are governed by
Ford's limited fleet special terms and conditions. The current terms and conditions under which we purchase Ford vehicles are effective through December&nbsp;31, 2011 and we anticipate entering into
a new set of terms and conditions with Ford for 2012 prior to the end of 2011. We are entitled to volume pricing discounts for vehicles we purchase from Ford. Vehicles we purchase from Ford benefit
from a Ford-provided three year / 100,000 mile bumper-to-bumper warranty. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Impact Clean Power Technology&nbsp;S.A.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We developed our Smith Power technology in collaboration with CPTS. In September 2010, we entered into a development, supply and
license agreement with CPTS under which CPTS granted us an exclusive, non-transferable, sublicensable (to subcontractors or vendors that manufacture, fabricate or supply components or
parts to us) license to the technology and know-how related to the battery management system and battery pack assembly that comprises Smith Power for use in commercial electric vehicles in
the United States, Canada and Mexico. The agreement has an initial term of ten years and we have the option to extend the term for an unlimited number of additional two-year terms,
provided we and CPTS agree on a royalty structure for such additional two-year terms. Subject to CPTS's agreement, we have the ability to expand the scope of the license to cover
additional territories. This license allows us to develop, manufacture, improve, use and sell battery pack assemblies and management systems, and includes rights in related hardware and software. CPTS
currently manufactures our battery management system and assemblies, although we have the right under the development, supply and license agreement to assume control of manufacturing, either by
manufacturing these components ourselves or by shifting production to third party contract manufacturers. We are required to begin manufacturing battery modules for which the design is licensed to us
by CPTS within 24 months of the date of the agreement, or September&nbsp;30, 2012, unless our failure to do so is a result of CPTS's failure to perform under the agreement. The agreement may be
terminated by either party upon a material breach by the other. We pay CPTS royalties on the products manufactured by or on our behalf under the license and also will pay fees through September 2012
for technical support and engineering services in connection with manufacturing. In November 2011, we also granted CPTS an option to purchase 50,000 shares of our common stock. CPTS is prohibited from
selling the products supplied under the agreement for use in commercial electric vehicles within the territory covered by the agreement, which initially is the United States, Canada and Mexico. CPTS
is permitted to sell such products outside of such field of use and territory. We have branding rights over all products created under the license agreement that are sold in United States, Canada and
Mexico. CPTS does not provide us warranty coverage for the products it supplies to us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Magnetic Systems Technology Limited  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MagTec began supplying us with powertrain components for the Smith Newton in May 2011 and Smith Europe entered into a license and
manufacturing agreement with MagTec in November 2011. The agreement has an initial ten-year term, which continues thereafter unless terminated by either us </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>or
MagTec on at least 12&nbsp;months' notice. Under the agreement, MagTec granted us an exclusive worldwide license, with limited sublicensing rights, to manufacture and use its permanent magnet
traction motor, gearbox unit and power controller, each of which are integral components of Smith Drive. MagTec initially is manufacturing the motor, gearbox and controller for us, although we have
the right under the license agreement to assume control of manufacturing, either by manufacturing these components ourselves or by shifting production to third party contract manufacturers. We have
the right to sublicense the rights granted to us under the agreement to subcontractors in the United States, Malaysia or the European Union, subject to certain exceptions, and in other territories
with MagTec's written consent. We anticipate shifting production of these components to a contract manufacturer by the first half of 2012. Once we assume control of manufacturing, we will pay MagTec a
royalty based on the number of Smith Drive systems manufactured using the licensed technology. MagTec warrants the products it manufactures and supplies to us against design and manufacturing defects
and warrants the products we manufacture using MagTec's design against design defects for 12&nbsp;months from the product's first use, subject to a maximum warranty period of 18&nbsp;months from
the date on which the product is delivered to us. We agreed to grant MagTec an option to purchase 30,000 shares of our common stock in connection with our entry into the license and manufacturing
agreement. MagTec granted us a right of first refusal in connection with any sale of a controlling interest in its stock or substantially all of business to a competitor of ours, subject, in each
case, to an existing right of first refusal previously granted by MagTec to a third party that is not a competitor of ours. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Sensor-Technik UK&nbsp;Ltd.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sensor-Technik UK&nbsp;Ltd., or Sensor-Technik, developed, based on specifications supplied by us, the technology and supplies the
hardware components for our Smith Link technology. In January 2011, we entered into a development, supply and license agreement with Sensor-Technik under which we own the worldwide rights to all
intellectual property and know-how related to the hardware components and software supplied by Sensor-Technik. We granted Sensor-Technik the right to manufacture and sell the hardware
components and software to customers outside of the commercial electric vehicle market and outside of the United States. The agreement has a perpetual term and permits us, upon 90&nbsp;days' written
notice to Sensor-Technik, to manufacture the hardware components and software covered by the agreement. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Key suppliers without supply agreements  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> BRUSA Electronik AG  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;BRUSA Electronik AG, or BRUSA, supplies chargers for use in the Smith Edison. We have not entered into a long-term contract
with BRUSA, but purchase these components through purchase orders on an as needed basis. BRUSA provides a 24-month warranty on the components it supplies to us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> EDN Group&nbsp;S.r.l.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EDN supplies the chargers used in the Smith Newton. We have not entered into a long-term contract with EDN, but we purchase
these components through purchase orders on an as-needed basis. EDN provides a 24-month warranty on the chargers it supplies to us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Enova Systems&nbsp;Inc.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Enova supplies us with certain powertrain components that we use in the Smith Newton and Smith Edison. We have not entered into a
long-term contract with Enova, but purchase these components through purchase orders on an as needed basis. Enova provides a one-year warranty on the components it supplies to
us. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> StormMQ Limited  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;StormMQ developed the message queuing software that allows for the encryption and decryption of the data collected and transmitted by
our Smith Link technology. We have not entered into a definitive contract with StormMQ for the use of this software. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> Valence Technology,&nbsp;Inc.  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Valence currently supplies lithium-ion batteries and battery management systems used in the Smith Newton and Smith Edison.
Prior to our entry into the A123 product sales agreement discussed above, we purchased all of the battery systems used in our vehicles from Valence. We order battery modules from Valence through
purchase orders on an as-needed basis. Valence provides a two year or five year warranty, depending on battery system, on the products we purchase from it. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OUR CUSTOMERS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our primary customers are industry-leading companies and government entities that operate substantial, depot-based,
medium-duty commercial vehicle fleets in the food&nbsp;&amp; beverage, utility, telecommunications, retail, grocery, parcel and postal delivery, bus, logistics, short haul, facilities
management, airport operations and military and government sectors. Our customers include Frito-Lay, Coca-Cola, Staples, Sainsbury's, FedEx, TNT Express, DHL, Dairy Crest
Group&nbsp;PLC and the U.S. Army, Navy and Marine Corps. We believe that our customers have the corporate or public commitment and resources to support and sustain the development of the commercial
electric vehicle industry. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
significant portion of our revenue is generated from a limited number of customers. Staples,&nbsp;Inc. and Dairy Crest Group&nbsp;PLC accounted for 16% and 15%, respectively, and
together accounted for approximately 31%, of our combined revenue for 2010. Frito-Lay accounted for approximately 56% of our consolidated revenue for the six months ended June&nbsp;30,
2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
continue to focus on increasing sales to our existing customers and also are working to attract customers in new market segments, such as postal delivery and the public sector, and in
the sectors in
which we already have customers. As a result of this focus, as of October&nbsp;31, 2011 we have an order backlog of 120 vehicles, representing vehicle revenue of $15.7&nbsp;million, and have
allocated nearly all of our estimated 540 production slots through July 2012. We expect that our number of available production slots will increase as we transition our supply chain, which will allow
us to ramp our production and increase our production capacity. We believe that substantially all of the 120 orders included in our order backlog will not be completed by the end of 2011. We include
in our order backlog vehicles yet to be produced that are subject to binding purchase agreements or written purchase orders we have received. Our order backlog excludes vehicles in inventory awaiting
additional modifications or delivery to the end customer. We generally manage our production schedule on a rolling six-month forward basis and allocate production slots based on our
receipt of binding purchase agreements and purchase orders as well as customers' ordering forecasts. Our allocation of production slots based on customers' ordering forecasts does not represent a
guarantee that those customers will place orders, that customers will not alter their forecasted delivery dates when placing orders or that orders made will not be cancelled. Nevertheless, we believe
that closely monitoring our projected production schedule allows us to better manage our business, including our inventory levels. Although the backlog of unfilled orders is one of many indicators of
market demand, other factors such as changes in production rates, internal and supplier available capacity, new vehicle introductions and competitive pricing actions may affect
point-in-time comparisons. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> SALES, MARKETING AND DISTRIBUTION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We primarily market and sell our commercial electric vehicles in the United States and United Kingdom through a direct sales force. We
also have limited distribution arrangements with third parties </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>in
the Faroe Islands, France, Greenland, Hong Kong, Iceland, Ireland and Macau. We also have worked with, and intend to continue working with, with key vehicle up-fitters to jointly market
our commercial electric vehicles, allowing us to leverage their sales forces, customer relationships and credibility in a market segment. Furthermore, we have retained a third party public relations
firm to help us increase awareness of our company and our vehicles. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
offer a differentiated approach to commercial vehicle sales and service that departs from traditional truck sales and service models. Our approach involves a comprehensive plan for
the pilot and roll-out of our electric vehicles, as well as the ongoing replacement of existing commercial vehicles with our electric vehicles, that is tailored to the individual needs of
our customers. As a part of this approach, we offer guidance to our customers regarding how to most effectively use and operate their electric vehicles and on integrating electric vehicles into their
existing fleets or transitioning to all-electric vehicle operations. This plan includes the development of a multi-year purchasing forecast to help the customer systematically
integrate our vehicles into their fleets, as well as analytics that provide the expected economic and environmental impact of fleet conversion. We believe that our strategy of targeting
industry-leading companies and providing
them with an individualized sales and service solution has elevated our public profile, enhanced the credibility of our vehicles in the marketplace and made our customers advocates of our sales
approach and our vehicles, all of which enhances our ability to sell vehicles to new customers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a part of our sales strategy, we separately present to our customers the base vehicle price and the battery system price. We believe that, in most cases, our base vehicle price is
competitive with or a slight premium to the price of a diesel-fueled vehicle with a comparable GVW. Our approach to pricing allows customers to compare the relative merits of a diesel truck's low cost
energy storage system (the fuel tank) and more expensive and volatile energy cost (the per gallon price of diesel fuel) with our vehicle's higher cost energy storage system (the battery) and lower and
more predictable energy cost (the per kilowatt hour price of electricity). We believe these comparisons make our vehicles more attractive to customers than traditional diesel options, particularly
during periods of rising fuel prices. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Currently,
our marketing and sales personnel are located in our Kansas City, Missouri headquarters and our facility outside of Newcastle, England. We intend to expand our marketing and
sales force as we open our sales, service and assembly facilities. Each facility will have a team of dedicated marketing and sales employees with responsibility for the geographic region in which the
facility is located. As a result, we believe we can efficiently and cost-effectively build out our marketing and sales network. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
focus our marketing efforts on increasing brand awareness, generating demand for our vehicles, communicating product advantages and generating qualified leads for our sales force. We
rely on a variety of marketing vehicles, including participation in industry conferences and trade shows, public relations, industry research and our collaborative relationships with our business
partners to share our technical message with customers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> COMPETITION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The medium-duty commercial vehicle market is highly competitive and we expect it to become even more so in the future as
additional companies launch competing vehicle offerings. The medium-duty electric vehicle market, however, is less developed and competitive. In the broader medium-duty
commercial vehicle market, we compete with small to large global corporations that provide medium-duty commercial vehicles powered by internal combustion engines, including Ford, PACCAR,
Navistar, Hino, Fuso, Volvo, and Isuzu Motors. In the medium-duty commercial electric vehicle market, we compete with companies that produce all-electric commercial trucks or
vehicles powered by other alternative energy technologies, such as natural gas and hybrid technologies. These competitors include Ford, which, in partnership with Azure Dynamics, produces the Ford
Transit Connect EV&reg;; Navistar, which produces the Navistar eStar&reg;; Freightliner, which produces the </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>MT&nbsp;E-CELL;
Odyne Systems, which produces plug-in hybrid heavy- and medium-duty trucks; ZeroTruck, which produces an all-electric
medium-duty truck; and Electric Vehicles International, which produces an all-electric walk-in van and light- and medium-duty commercial electric
trucks. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
believe that the primary competitive factors within the medium-duty commercial vehicle market are: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the difference in the initial purchase prices of electric vehicles and comparable vehicles powered by internal combustion
engines, both including and excluding the impact of government and other subsidies and incentives designed to promote the purchase of electric vehicles;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the total cost of vehicle ownership over its expected life, which includes the initial purchase price and ongoing
operational and maintenance costs;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>vehicle quality, performance and safety;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>government regulations and economic incentives promoting fuel efficiency and alternate forms of energy; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the quality and availability of service for the vehicle, including the availability of replacement parts; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>for electric vehicles, the range over which they may be driven on a single battery charge. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> GOVERNMENTAL PROGRAMS AND INCENTIVES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that the availability of government subsidies and incentives currently is an important factor considered by our customers
when purchasing our vehicles, and that our growth depends in part on the availability and amounts of these subsidies and incentives. Over time, we believe that the importance of the availability of
government subsidies and incentives will decrease, as we continue to reduce the upfront cost of our vehicles. In order to help ensure that we and our customers benefit from available subsidies and
incentive programs in both the United States and in Europe, we have incentive specialists that work directly with our sales team and our customers on these issues. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> U.S. programs and incentives  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Smith Electric Vehicles Medium-Duty Electric Vehicle Demonstration Project  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In August 2009, the DOE awarded us a $10.0&nbsp;million grant under the DOE's Transportation Electrification Grant Program in order
to fund a portion of the EV Demonstration Project. This grant, which was increased to $32.0&nbsp;million in April 2010, is comprised of two parts: a development reimbursement grant and a customer
incentive grant. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the development reimbursement grant, we are eligible for reimbursement of one-third, or approximately $4.0&nbsp;million, of the qualifying direct costs, indirect
costs, and capital expenditures we incur related to the development of electric vehicle technology. The customer participation grant makes available to us up to $28.0&nbsp;million of funds from the
DOE that we pass through to our customers. The total cost of the EV Demonstration Project is approximately $68.0&nbsp;million, and we are responsible for funding the $36.0&nbsp;million not covered
by the DOE grant by November&nbsp;30, 2014, which is the expiration date for the project. We satisfy the majority of our $36.0&nbsp;million funding responsibility with the proceeds of sales of
vehicles that participate in the project. In addition, we are required to deliver 510 vehicles under this program by September&nbsp;30, 2013. If we are unable to fund our share of the project costs,
we will not receive all of the funds that are available to us and our customers and we could be responsible for reimbursing the DOE for amounts funded by it in excess of its agreed upon share of
project costs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, if we fail to place in service the required 510 vehicles by September&nbsp;30, 2013, we will be unable to use the full amount available to us under the program. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of September&nbsp;30, 2011, $17.3&nbsp;million of the $32.0&nbsp;million remained available for us and our customers under the grant. As of such date, we have received
$1.3&nbsp;million and $13.4&nbsp;million in development reimbursements and customer incentives, respectively, and have no outstanding unpaid requests for customer incentives, under the grant. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
purpose of the customer participation incentive grant is to capture performance data from an all-electric vehicle fleet of at least 500 vehicles that is based on our
Newton platform, which data can be used to accelerate production and reduce the costs of, enhance the technology related to, and help procure early acceptance of all-electric vehicle
fleets in the U.S. commercial vehicle marketplace. This data is collected using our Smith Link technology, which is installed in all of our vehicles. Under terms of the grant, participating vehicles
will be located and
operated in varying geographic and climatic regions and will include a diverse range of applications. For example, participating vehicles will include flatbed trucks, trucks with a cargo box, electric
boom trucks for utility work with ancillary power options, and refrigerated trucks with a cooled compartment for the food service industry. If a customer chooses to have a vehicle included in the
project, the customer and we enter into a program participation agreement that designates the term of the vehicle's inclusion in the project, the obligations of the customer under the project and the
amount that the customer will be compensated for participating in the project. Customers generally receive payment of $47,500 for participating in the program for a two year period and $71,000 for
participating in the program for a three year period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Defense Contract Audit Agency, or DCAA, is auditing companies who have received funding from the DOE, for DOE. A DCAA audit of us, completed in October 2010, revealed significant
deficiencies that are considered to be material weaknesses in our accounting system for accumulating and billing costs under government contracts or financial assistance agreements, including our
process for submitting reimbursement claims, our timing for submitting rebates to our customers and our calculation of indirect costs to be reimbursed by the DOE. The DCAA audit report recommended
that reimbursement of expenditures for fixed assets, direct labor and overhead be discontinued under the project until we remedy these issues. In January 2011, we responded to the DOE regarding the
DCAA audit findings. Based on this response, the DOE confirmed in July 2011 that it would resume reimbursements for qualified fixed asset expenditures and direct labor costs incurred by us in
connection with the EV Demonstration Project. We have submitted additional requested information to the DOE and are awaiting a decision on whether the DOE will resume reimbursement of qualified
indirect costs and overhead costs. The DOE has continued to fund our customer participation payments throughout the duration of the EV Demonstration Project. If the DCAA concludes that our remedial
steps taken in response to the current DCAA audit are insufficient, or a future DCAA audit reflects that we continue to have material weaknesses in our accounting system for accumulating and billing
costs under government contracts or financial assistance agreements, the DOE could terminate the EV Demonstration Project and we and our customers would lose access to the remaining
$17.3&nbsp;million of available funding under the project. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
grant agreement that governs our participation in the EV Demonstration Project provides that, subject to certain conditions, we may elect to retain title to any inventions conceived
of or first actually reduced to practice under or during the performance of the agreement. We must, however, grant the U.S. federal government a paid-up, nonexclusive, irrevocable,
worldwide license to use (or to authorize third parties to use on behalf of the federal government) such inventions. We do not believe that we are obligated, at this time, to grant the federal
government a license to any inventions that are material to our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are required to provide the DOE with certain data we collect in connection with the EV Demonstration Project, periodic progress, status, financial, scientific, technical and other
reports with regard to the project and semi-annual technical briefings that summarize the status, technical results and near-term plans for the project. The grant agreement
that governs our participation in the EV Demonstration Project provides that, while we retain the right to use and distribute all data first </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>produced
in the performance of the grant agreement or delivered to the DOE under the agreement, the federal government has unlimited rights in all such data. The federal government's unlimited rights
include the right to use, disclose, reproduce, prepare derivative works, and distribute copies to the public, in any manner and for any purpose, and to have or permit others to do so. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Finally,
we must provide DOE personnel with reasonable access to our facilities, personnel and books and records in connection with DOE audits of us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> California Hybrid Truck and Bus Voucher Incentive Program  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Smith Newton, in nine different combinations of wheel bases and vehicle weights, is among the vehicles eligible for purchase during
2011 under HVIP. HVIP is a partnership between the California Air Resources Board, or CARB, and CALSTART, the purpose of which is to help speed the early market introduction of clean,
low-carbon hybrid trucks. Under HVIP, dealers and fleet operators may request vouchers from HVIP on a first-come first-serve basis, up to the funding amount available for that
year, to reduce the cost of purchasing hybrid and zero emission medium- and heavy-duty trucks and buses. HVIP has $18.0&nbsp;million in funding available to distribute through vouchers for 2011.
HVIP vouchers range in amount from $10,000 to $40,000, depending on the gross vehicle weight of the purchased vehicle. The Smith Newton vehicles that are eligible for purchase under HVIP all are
eligible for $20,000 vouchers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;HVIP
funds the purchase of only fully commercialized hybrid and zero emission trucks and buses. Vehicles still in the demonstration or evaluation stage are not eligible for inclusion in
HVIP. Vehicle manufacturers must apply to have their hybrid and zero emissions trucks and busses included in HVIP's voucher program. Once a make and model is included in the program, the manufacturer
is not required to submit a full application for the succeeding year's program unless the vehicle has been modified. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Clean Cities  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our customers have been reimbursed approximately $1.7&nbsp;million in the aggregate for purchasing our commercial electric vehicles
under Clean Cities, a program administered by the DOE's Office of Efficiency and Renewable Energy, Vehicle Technology Program. According to the DOE, the mission of Clean Cities is to advance the
energy, economic, and environmental security of the United States by supporting local decisions to adopt practices that reduce the use of petroleum in the transportation sector. Clean Cities is a
government-industry partnership. Under the program, public and private stakeholders from businesses, city and state governments, the automotive industry, fuel providers, and community organizations
form coalitions throughout the country, which then work with the DOE to establish a plan for reducing petroleum consumption in their respective geographic areas. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have been in the past and are currently involved in Clean Cities coalitions in New York, Texas, Missouri and Ohio, which have taken advantage of federal funding for alternative fuel
vehicles to create incentives for purchasing electric vehicles, including our commercial electric vehicles. These incentives typically will offset 50% of the cost difference between our commercial
electric vehicles and standard vehicles, such as diesel trucks. These incentives have resulted in savings to our customers of between $64,000 to $94,000 per vehicle. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B><I> Diesel Emissions Reduction Act funding  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The National Clean Diesel Funding Assistance Program, which is administered by the EPA National Clean Diesel Campaign, provides funding
under the Diesel Emissions Reduction Act for projects that seek to reduce emissions from existing diesel engines. Eligible applicants include U.S. regional, state and local agencies that have
jurisdiction over transportation or air quality and certain nonprofit institutions that provide pollution reduction or educational services to owners and operators of diesel fleets or that have as
their principal purpose the promotion of transportation or air quality. Among the eligible uses of funding under this program are the purchase of buses and medium and heavy-duty trucks that result in
reduced diesel emissions. Approximately $32.0&nbsp;million of funding was available to be awarded under this program for 2011. We assist our customers in the competitive application process for
awards under this program. If a customer's application for a grant is approved, the grant would cover up to 25% of the cost of the customer's vehicle purchase from us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Congestion Mitigation and Air Quality Improvement Program  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Congestion Mitigation and Air Quality Improvement program, or CMAQ, which is jointly administered by the DOT Federal Highway
Administration and Federal Transit Administration, provides funding to states to support surface transportation projects and other related efforts that contribute air quality improvements and provide
congestion relief. CMAQ funding is allocated to the states annually based on a statutory formula that is based on population and air quality classification as designated by the Environmental
Protection Agency, or EPA. Each state's transportation department then is responsible for distributing the funds. State transportation departments may spend CMAQ funds on projects that reduce ozone
precursors, and at least 16 states have used CMAQ funds for alternative fuel vehicle projects (such as purchasing electric or hybrid vehicles). In June 2010, in partnership with Brown Cargo Van, Dole
Refrigerating&nbsp;Co. and Coulomb Technologies, we delivered our first medium-duty, refrigerated, all-electric delivery truck to a company in New York City under a project
funded by CMAQ. We have a goal of developing a turnkey project that would allow for the easy roll out of a program similar to HVIP that includes reimbursement of $20,000 of the cost of our vehicles
with CMAQ funds. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Other state incentives  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A number of states and municipalities in the United States, as well as certain private enterprises, offer incentive programs to
encourage the adoption of alternative fuel vehicles, including tax exemptions, tax credits, exemptions and special privileges. For example, New Jersey and Connecticut exempt the purchase of electric
vehicles from state sales tax. Other states, including Colorado, New York, Georgia and Virginia, provide for substantial state tax credits for the purchase of electric vehicles. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> E.U. programs and incentives  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Low Carbon Vehicle Procurement Programme  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Low Carbon Vehicle Procurement Programme, or LCVPP, was established by the United Kingdom's Department for Transport, and is
administered by its delivery partner, the Centre of Excellence for Low Carbon and Fuel Cell Technologies, in order to accelerate the introduction of lower carbon technologies into the U.K. vehicle
market, with the ultimate objective of reducing overall carbon emissions from vehicle fleets. The LCVPP is administered in two phases, the first of which is ongoing with a target completion date of
November 2013. All vehicles procured under Phase&nbsp;1 have been delivered and are now subject to a period of vehicle performance monitoring. Purchases of vehicles under Phase&nbsp;1 of the
program were restricted to public sector organizations and included the City of </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>London
Corporation, Transport for London, the Metropolitan Police and the Environment Agency, as well as several county councils. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Department of Transport provided &pound;20.0&nbsp;million of funding for Phase&nbsp;1 of the program between April 2008 and February 2011. Under the program, public sector
organizations that purchased electric or low carbon producing vans from participating manufacturers received a rebate from the U.K. government to cover the difference in price between the electric or
low carbon producing van and an equivalent sized conventional diesel van. The average rebate for the purchase of our vehicles was &pound;50,000 per vehicle. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Phase&nbsp;1
of the program was intended to allow public sector bodies to test electric and low carbon producing vehicles in real-world conditions while simultaneously
providing an opportunity for manufacturers to demonstrate the performance of their vehicles in high-profile fleets. We were one of four suppliers of electric vehicles under Phase&nbsp;1,
supplying 43 Edison vans out of a total 197 electric and hybrid vehicles. The U.K. Department of Transport is evaluating whether to proceed with Phase&nbsp;2 of the program, which would make
available additional funds to encourage the adoption of electric and low carbon producing vehicles across the public sector. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Technology Strategy Board initiatives  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The TSB, which was established in 2007 and is sponsored by the U.K. Department for Business, Innovation and Skills, is the United
Kingdom's national innovation agency. The TSB's purpose is to accelerate economic growth by stimulating and supporting
business-led innovation. The TSB runs competitions that are designed to accelerate innovation in specific sectors and provides partial funding for successful applicants. Generally, these
competitions require several organizations to combine their expertise and collaborate to further innovation and development in particular sectors. We participate or have participated in three TSB
competitions: DESERVE, EVADINE and E VAN. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the collaboration agreements governing our participation in the three TSB programs, we own all rights to the intellectual property that we develop in the course of the project and
jointly own the rights to any intellectual property developed jointly with another project participant. Together with the other project participants, we jointly own the information,
know-how, results, inventions, software and intellectual property identified in the course of the project. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Project DESERVE  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We participated in Project DESERVE, which was administered under the Technology Programme "Ultra Low Carbon Vehicle Demonstrator"
Competition for Funding, between August&nbsp;1, 2008 and February&nbsp;1, 2011 in collaboration with three other successful project applicants. The TSB provided total funding to the project of
&pound;384,166, which focused on the development of high energy batteries and high power supercapacitors for electric range van evaluation. We were the lead participant in the project and
received individual funding of &pound;64,000 through September&nbsp;30, 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Project EVADINE  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have participated in Project EVADINE, which is administered under the Technology Programme "Ultra Low Carbon Vehicle Demonstrator"
Competition for Funding, since June&nbsp;1, 2009 in collaboration with four other successful project applicants. The project runs for five years until May&nbsp;31, 2014 and focuses on accelerating
the development of electric vehicles in northeast England. The TSB will provide aggregate total funding to the project of &pound;5.4&nbsp;million, of which we will receive approximately
&pound;179,000 in order to develop an electric version of the Ford Connect Van and to produce an executive mini-bus based on the Ford Transit vehicle platform. We have received
approximately &pound;127,000 under this project through September&nbsp;30, 2011. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><I> Project E VAN  </I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have participated in Project E VAN, which is administered under the Technology Programme BH004H./.400087 Competition for Funding, as
lead participant since October&nbsp;1, 2009 in collaboration with four other successful applicants. The project runs for three years until September&nbsp;30, 2012 and focuses on the development of
an ultra-high efficiency electrically powered vehicle system to be applied and demonstrated on a medium sized commercial vehicle. In particular, we aim to demonstrate the benefits of
permanent magnet traction motors on larger vehicle platforms. The TSB will provide aggregate total funding to the project of &pound;1.4&nbsp;million, of which we expect to receive
approximately &pound;568,000. We have received total funding of approximately &pound;219,000 under this project through September&nbsp;30, 2011. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> GOVERNMENT REGULATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our electric vehicles are designed to comply with a significant number of governmental regulations and industry standards, some of
which are evolving as new technologies are deployed. Government regulations regarding the manufacture, sale and implementation of products and systems similar to our electric vehicles are subject to
future change. We cannot predict what impact, if any, such changes may have upon our business. We believe that our vehicles are in conformity with all applicable laws in all relevant jurisdictions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Emission and fuel economy standards  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Government regulation related to climate change is under consideration at the U.S. federal and state levels. The EPA and the National
Highway Traffic Safety Administration, or NHTSA, issued a final rule for greenhouse gas emissions and fuel economy requirements for trucks and heavy-duty engines on August&nbsp;9, 2011,
which will have an initial phase in starting with model year 2014 and a final phase in occurring in model year 2017. NHTSA standards for model year 2014 and 2015 will be voluntary, while mandatory
standards will first come into effect in 2016. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
rule provides emission standards for CO2 and fuel consumption standards for three main categories of vehicles: (i)&nbsp;combination tractors, (ii)&nbsp;heavy-duty
pickup trucks and vans and (iii)&nbsp;vocational vehicles. We believe that the Smith Newton and Smith Edison would be considered "vocational vehicles" under the rule. According to the EPA and NHTSA,
vocational vehicles consist of a wide variety of truck and bus types, including delivery, refuse, utility, dump, cement, transit bus, shuttle bus, school bus, emergency vehicles, motor homes and tow
trucks, and are characterized by a complex build process, with an incomplete chassis often built with an engine and transmission purchased from other manufacturers, then sold to a body manufacturer. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
EPA and NHTSA rule also establishes multiple flexibility and incentive programs for manufacturers of alternatively fueled vehicles, such as the Smith Newton and Smith Edison,
including an engine averaging, banking and trading, or ABT, program, a vehicle ABT program and additional credit programs for early adoption of standards or deployment of advanced or innovative
technologies. The ABT programs will allow for emission and/or fuel consumption credits to be averaged, banked or traded within defined groupings of the regulatory subcategories. The additional credit
programs will allow manufacturers of engines and vehicles to be eligible to generate credits if they demonstrate improvements in excess of the standards established in the rule prior to the model year
the standards become effective or if they introduce advanced or innovative technology engines or vehicles. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Clean Air Act requires that we obtain a Certificate of Conformity issued by the EPA and a California Executive Order issued by CARB with respect to emissions for our vehicles. The
Certificate of Conformity is required for vehicles sold in states covered by the Clean Air Act's standards and the Executive Order is required for vehicles sold in states that have sought and received
a waiver from the EPA to utilize California standards. The California standards for emissions control for certain regulated </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>pollutants
for new vehicles and engines sold in California are set by CARB. States that have adopted the California standards as approved by EPA also recognize the Executive Order for sales of
vehicles. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Manufacturers
who sell vehicles in states covered by federal requirements under the Clean Air Act without a Certificate of Conformity may be subject to penalties of up to $37,500 per
violation and be required to recall and remedy any vehicles sold with emissions in excess of Clean Air Act standards. In 2009, we received approval from CARB to sell the Smith Newton in California
based on our own emissions tests. We were not granted a Certificate of Conformity because CARB had not established a formal certification procedure for heavy-duty, all-electric vehicles. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
E.U. Directive on the Promotion of Clean Energy Efficient Road Vehicles requires local, regional and national public authorities to take into account operational lifetime energy and
environmental impacts when purchasing on-road vehicles. When purchasing vehicles, public authorities must consider the vehicle's energy consumption, carbon dioxide and nitrogen oxide
emissions,
non-methane hydrocarbons and particular matter emissions, among other environmental impacts. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Vehicle safety and testing  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The National Traffic and Motor Vehicle Safety Act of 1966, or the Safety Act, regulates motor vehicles and motor vehicle equipment in
the United States in two primary ways. First, the Safety Act prohibits the sale in the United States of any new vehicle or equipment that does not conform to applicable motor vehicle safety standards
established by NHTSA. Meeting or exceeding many safety standards is costly, in part because the standards tend to conflict with the need to reduce vehicle weight in order to meet emissions and fuel
economy standards. Second, the Safety Act requires that defects related to motor vehicle safety be remedied through safety recall campaigns. A manufacturer is obligated to recall vehicles if it
determines that the vehicles do not comply with a safety standard. Should we or NHTSA determine that either a safety defect or noncompliance exists with respect to any of our vehicles, the cost of
such recall campaigns could be substantial. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
E.U. Regulation on the Safety of Motor Vehicles sets safety standards for motor vehicles, such as electronic stability control requirements and braking standards, and imposes noise
emission limit values and wet grip requirements for tires. A European Commission Regulation of April 2011 makes mandatory in Europe the safety requirements for battery-powered electric vehicles of
UNECE Regulation&nbsp;100 and its amendments. European standardization bodies also are expected to adopt harmonized standards on the charging of electric vehicles, which could result in additional
manufacturing and design costs for electric vehicles marketed in Europe. These requirements and further amendments may restrict the marketing of electric vehicles in Europe. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Battery safety and testing  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our battery pack conforms to mandatory regulations that govern transport of "dangerous goods," which includes lithium-ion
batteries, that may present a risk in transportation. The governing regulations, which are issued by PHMSA, are based on the UN Recommendations on the Safe Transport of Dangerous Goods Model
Regulations, and related UN Manual Tests and Criteria. The regulations vary by mode of transportation when these items are shipped such as by ocean vessel, rail, truck or air. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
battery module suppliers have completed the applicable transportation tests for our prototype and production battery packs demonstrating our compliance with the UN Manual of Tests
and Criteria, including: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>altitude simulation, which involves simulating air transport;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>thermal cycling, which involves assessing cell and battery seal integrity; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>102</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
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<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>vibration, which involves simulating vibration during transport;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>shock, which involves simulating possible impacts during transport;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>external short circuit, which involves simulating an external short circuit; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>overcharge, which involves evaluating the ability of a rechargeable battery to withstand overcharging. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
Europe, industrial batteries, including the lithium-ion batteries used in electric vehicles, are subject to the requirements of the E.U. Batteries Directive. This
Directive, among other things, bans batteries containing more than 0.0005% of mercury and requires manufacturers, including vehicle manufacturers, to pay and provide for the collection, treatment,
recycling, reuse and sound disposal of the batteries used in vehicles. We do not believe that the batteries we use in our U.K.-produced vehicles exceed the mercury threshold established under this
Directive. The inland transportation of batteries, including lithium-ion batteries, is subject to the requirements of Directive 2008/68 on the Inland Transport of Dangerous Goods, and E.U.
waste legislation also
imposes stringent restrictions on the handling, intra-E.U. shipment and export to third countries of waste batteries. These requirements may delay the introduction of advanced technology
vehicle batteries in Europe and impose significant costs on us. We are exploring arrangements with third parties to dispose of or otherwise recycle used battery packs. Currently, if a customer wishes
to return a battery pack from one of our vehicles, we return the battery pack to our supplier for disposal. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
European production activities, vehicles and parts marketed in the E.U., as well as those of our suppliers, also are subject to the registration, evaluation, authorization and
restrictions procedures of the E.U.'s REACH Regulation for chemicals. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Vehicle dealer and distribution regulation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain states' laws require motor vehicle manufacturers and dealers to be licensed in such states in order to conduct manufacturing
and sales activities. To date, we are registered as both a motor vehicle manufacturer and dealer in Missouri. We have not yet sought formal clarification of our ability to manufacture or sell our
vehicles in any other states. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have performed an analysis of the principal laws in the European Union relating to our current distribution model and our future decentralized production, sales and service model and
believe that we do now and will continue to comply with such laws; however, we have not performed a complete analysis in all foreign jurisdictions in which we may sell vehicles. Accordingly, there may
be laws in jurisdictions we have not yet entered or laws we are unaware of in jurisdictions we have entered that may restrict our business practices. Even for those jurisdictions we have analyzed, the
laws in this area can be complex, difficult to interpret and may change over time. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> INTELLECTUAL PROPERTY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success depends in part on our ability to protect our core technology, to operate our business without infringing the intellectual
property rights of others and to prevent others from infringing our intellectual property rights. To protect our core technology, we rely primarily on trade secrets, including know-how,
and employee and third party nondisclosure and non-competition agreements. We also rely on intellectual property licenses, other contractual rights and common law rights to establish and
protect our proprietary rights in our technology. We do not own any patents and do not have any patent applications pending with the USPTO or applicable foreign patent filing offices. We have entered
into intellectual property licenses with third parties in order to obtain the intellectual property rights necessary to manufacture our vehicles, including for the battery management system and
battery pack used in our Smith Power
system and the powertrain that forms the basis of our Smith Drive system. See "&#151;Key Suppliers" for a description of these license agreements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>103</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
filed applications for trademark protection with the USPTO in July 2011 for the marks "Smith," "Smith Electric," "Smith Link," "Smith Drive," "Smith Power," "Newton" and "Edison," and
for the Smith Electric Vehicles logo in November 2011. In August and September 2011, we filed applications for international trademark registration under the Madrid Protocol and in Canada for the mark
"Smith". We are in the process of filing applications to register our marks in the European Union and other designated countries around the world. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
grant agreement that governs our participation in the EV Demonstration Project provides that, subject to certain conditions, we may elect to retain title to any inventions conceived
of or first actually reduced to practice under or during the performance of the agreement. We must, however, grant the U.S. federal government a paid-up, nonexclusive, irrevocable,
worldwide license to use (or to authorize third parties to use on behalf of the federal government) such inventions. We do not believe that we are obligated, at this time, to grant the federal
government a license to any inventions that are material to our business. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are required to provide the DOE with certain data we collect in connection with the EV Demonstration Project, periodic progress, status, financial, scientific, technical and other
reports with regard to the project and semi-annual technical briefings that summarize the status, technical results and near-term plans for the project. The grant agreement
that governs our participation in the EV Demonstration Project provides that while we retain the right to use and distribute all data first produced in the performance of the grant agreement or
delivered to the DOE under the agreement, the federal government has unlimited rights in all such data. The federal government's unlimited rights include the right to use, disclose, reproduce, prepare
derivative works, and distribute copies to the public, in any manner and for any purpose, and to have or permit others to do so. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the collaboration agreements governing our participation in the DESERVE, EVADINE and E VAN programs sponsored by the Technology Strategy Board, or TSB, we own all rights to the
intellectual property that we develop in the course of the project and jointly own the rights to any intellectual property developed jointly with another project participant. Together with the other
project participants, we jointly own the information, know-how, results, inventions, software and intellectual property identified in the course of the project. See
"&#151;Governmental Programs and Incentives&#151;E.U. programs and incentives&#151;Technology Strategy Board initiatives" for more information about our participation in these
collaborations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> EMPLOYEES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of September&nbsp;30, 2011, we had 281 full-time employees, of which 80 were employed by Smith in the United States
and 201 were employed by Smith Europe. Seventy-six of our employees are engaged in production, 36 are engaged in research, development, design and engineering, 12 are engaged in sales and
marketing, 120 are engaged in service and 37 are engaged in general and administration. None of our U.S. employees are represented by labor unions or are covered by a collective bargaining agreement
with respect to their employment, while approximately 17% of our Smith Europe employees are represented by Unite the Union, a U.K. trade union. We have not experienced any work stoppages or strikes
and generally believe that our relationships with our unionized and non-unionized employees are good. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>104</FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the principal functions of our full-time employees as of September&nbsp;30, 2011. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="65pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="26pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:66pt;"><FONT SIZE=1><B>Principal Function

<!-- COMMAND=ADD_SCROPPEDRULE,66pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Smith </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Smith Europe </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Production</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>25</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>51</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>76</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research, development, design and engineering</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>17</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>19</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>36</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Sales and marketing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Service</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>107</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>120</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>General and administration</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>19</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>37</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>80</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>201</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>281</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> PROPERTIES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our corporate headquarters are located in Kansas City, Missouri. We currently lease or license facilities in Kansas City, Missouri and
in the United Kingdom that are used for production, technical, research and development, sales, service and administrative purposes. We currently own two of our facilities located in the United
Kingdom. We intend to add new facilities and expand our existing facilities as we add employees, increase our production and open our sales, service and assembly facilities. We believe that suitable
additional or alternative space will be available in the future on commercially reasonable terms to accommodate our foreseeable future expansion. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the location, approximate size and primary use of our principal owned, leased and licensed facilities: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="24%" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="82pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="24%" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="47pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="116pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:31pt;"><FONT SIZE=1><B>Location

<!-- COMMAND=ADD_SCROPPEDRULE,31pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Approximate Size<BR>
(Building) in<BR>
Square Feet </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Primary Use </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Owned,<BR>
Leased or<BR>
Licensed </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Lease/ License<BR>
Expiration Date<BR>
(if applicable) </B></FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Kansas City, Missouri</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8,600</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Administration and sales and marketing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Leased</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>May&nbsp;31, 2012(1)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-top:11pt;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Kansas City, Missouri</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
400,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>(2)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:11pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Production; research, development, design and engineering; and service</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><p align=center style="font-family:times;margin-top:11pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Leased</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:11pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>September&nbsp;30, 2012(3)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><p style="font-family:times;margin-top:11pt;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Washington, Tyne and Wear, England</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
250,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>(4)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:11pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Production; research, development, design and engineering; service; administration and sales and
marketing</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="BOTTOM" style="font-family:times;"><p align=center style="font-family:times;margin-top:11pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Licensed</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p align=left style="font-family:times;margin-top:11pt;margin-left:0pt;text-indent:0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>December&nbsp;31, 2013</FONT></TD>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Square
footage shown reflects the size of the leased area, rather than the size of the office building. The initial term of this lease expired on
May&nbsp;31, 2011. The lease provides for two one-year renewal terms that may be exercised at our option, the first of which we have exercised.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>We
lease approximately 85,100 square feet of this facility from the Kansas City, Missouri government. We have a right of first refusal to lease
approximately 72,000 square feet of the remainder of the facility.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>The
initial term of this lease expired on September&nbsp;30, 2010. The lease provides for three one-year renewal terms that may be exercised
at our option, two of which we have exercised.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Smith
Europe licenses the right to use approximately 80,000 square feet of this facility from Tanfield. See "Relationships and Related Person
Transactions&#151;Tanfield Agreements&#151;Tanfield license agreement" for further information about this license agreement. </FONT></DD></DL>
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>105</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
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 <P style="font-family:times;"><FONT SIZE=2><B> LEGAL PROCEEDINGS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, we are subject to various claims arising in the ordinary course of business, including claims that our business
activities infringe on the intellectual property rights of third parties, and are party to legal proceedings that constitute ordinary, routine litigation incidental to our business. In our opinion,
the disposition of these claims and proceedings, after taking into account recorded accruals and our insurance coverage limits, to date has not had, and in the future will not have, a material effect
on our business, financial condition, operating results or cash flows. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>106</FONT></P>

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<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

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<BR></FONT><FONT SIZE=2><B>  MANAGEMENT    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> EXECUTIVE OFFICERS AND DIRECTORS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information about our executive officers and directors as of November&nbsp;8, 2011: </FONT></P>
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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Age </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Position </B></FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bryan&nbsp;L. Hansel</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>46</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>President, Chief Executive Officer, Chairman</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Paul&nbsp;R. Geist</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>48</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Chief Financial Officer</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robin&nbsp;J. Mackie</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>52</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Chief Technology Officer and Senior Vice President, Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Geoffrey&nbsp;E. Allison</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>43</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Managing Director, Smith Europe</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Angela Strand Boydston</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>43</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Chief Marketing Officer</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Ben Kevin Neal</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>51</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Vice President of Human Relations and Administration</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Jacques&nbsp;D. Schira</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>56</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>General Counsel</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Francis&nbsp;H. Striker III</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>45</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Vice President of Global Operations</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>John&nbsp;N. Bridge</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>69</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robert&nbsp;J. Druten</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>64</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Darren Kell</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>43</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
</TR>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Thomas&nbsp;T. Stallkamp</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>65</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
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 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Bryan&nbsp;L. Hansel</I></FONT><FONT SIZE=2> has served as our President and Chief Executive Officer and as a director since our inception in January 2009.
Mr.&nbsp;Hansel was appointed Chairman of our board of directors in November 2011. Prior to joining us, from October 2004 to August 2008, Mr.&nbsp;Hansel served as the President and Chief
Executive Officer and as a director of Evo Medical Solutions, a manufacturer and distributor of home respiratory medical devices. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Hansel
was selected to serve on our board of directors because of his extensive knowledge of our operations, strategic plan and customers through his service as our President
and Chief Executive Officer and as one of our founding stockholders. We believe the experience Mr.&nbsp;Hansel gained through the executive positions he has held throughout his career make him an
essential member of our board of directors and a vital interface between our management and the board. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Paul&nbsp;R. Geist</I></FONT><FONT SIZE=2> has served as our Chief Financial Officer since November 2010. Prior to joining us, Mr.&nbsp;Geist was employed in
various finance roles by American Italian Pasta Company, or AIPC, from October 2004 to November 2010. From January 2008 through November 2010, Mr.&nbsp;Geist served as AIPC's Executive Vice
President and Chief Financial Officer. From October 2004 through January 2008, he served as AIPC's Vice President and Corporate Controller and he was named principal accounting officer in August 2006.
Previously, Mr.&nbsp;Geist held executive accounting and finance positions with Potbelly Sandwich Works, a privately-owned restaurant company, Westar Energy,&nbsp;Inc., a public electric utility,
Panera Bread Company, a public restaurant company and Houlihan's Restaurant Group,&nbsp;Inc., including serving as Chief Financial Officer for Westar Energy,&nbsp;Inc. and Houlihan's Restaurant
Group,&nbsp;Inc. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Robin&nbsp;J. Mackie</I></FONT><FONT SIZE=2> has served as our Chief Technology Officer and as a director since our inception in January 2009, and as our Senior
Vice President since November 2011. Mr.&nbsp;Mackie also has served as Smith Europe's Chief Technology Officer and Senior Vice President since November 2011. From
October 2005 to August 2008, Mr.&nbsp;Mackie served as the Director of Product Development of Evo Medical Solutions. Mr.&nbsp;Mackie currently serves as the Chairman of the Board of Governors of
Gateshead College in England. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Mackie
was selected to serve on our board of directors because of his operational, engineering and managerial experience, as well as his extensive knowledge of our operations
through his role as one of our initial officers and founding stockholders. We believe that Mr.&nbsp;Mackie's over 25&nbsp;years of </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>107</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>engineering
experience in the medical and automotive industries and over ten years of experience serving on the boards of directors of technology companies enables Mr.&nbsp;Mackie to provide
valuable guidance to our board of directors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Geoffrey&nbsp;E. Allison</I></FONT><FONT SIZE=2> has served as the Managing Director of Smith Europe since we acquired the Smith UK business in January 2011.
Prior to joining us, Mr.&nbsp;Allison served as the Managing Director of the Smith UK Zero-Emission Vehicle Division from July 2008 through December 2010. Mr.&nbsp;Allison previously
served as Plant Manager of Tanfield's production site outside of Newcastle, England from July 2006 to July 2008. Mr.&nbsp;Allison served on Tanfield's board of directors from July 2008 to December
2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Angela Strand Boydston</I></FONT><FONT SIZE=2> has served as our Chief Marketing Officer since April 2011. Prior to joining us, Ms.&nbsp;Boydston worked for
Proteus Biomedical, a developer of medical and biotechnology devices, where she served as Vice President of Market Development from January 2009 to April 2011 and as Senior Director of Marketing from
August 2006 to December 2008. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Ben Kevin Neal</I></FONT><FONT SIZE=2> has served as our Vice President of Human Resources and Administration since February 2009. From January 1999 to June 2008,
Mr.&nbsp;Neal served as the Vice President, Human Resources for Farmland Foods,&nbsp;Inc., a global food manufacturer and distributor. Mr.&nbsp;Neal serves as a director of the Kansas
City&nbsp;&amp; Vicinity Workforce Investment Board and the Kansas City International Airport Community Improvement District Board. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Jacques&nbsp;D. Schira</I></FONT><FONT SIZE=2> has served as our General Counsel since March 2009. From March 2006 to March 2009, Mr.&nbsp;Schira served as
General Counsel of Medical Industries America,&nbsp;Inc., a medical device manufacturer and distributor. In April 2008, Mr.&nbsp;Schira filed a personal bankruptcy petition, which was discharged
in February 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Francis&nbsp;H. Striker III</I></FONT><FONT SIZE=2> has served as our Vice President of Global Operations since May 2011. From October 2007 to May 2011,
Mr.&nbsp;Striker served as the Vice President of Americas Operations and the Director of the Ottawa Multi-Assembly Unit of Cargotec Solutions,&nbsp;LLC, a provider of cargo handling
services and solutions. From May 2006 to October 2007, Mr.&nbsp;Striker served as the Director of Operations of United Rotary Brush Corporation, a manufacturer of road and runway rotary brooms and
engineered brush products. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>John&nbsp;N. Bridge</I></FONT><FONT SIZE=2> has served as a director since August 2009. Dr.&nbsp;Bridge is also Chairman of Inspiredspaces&nbsp;Ltd and
Chairman of Integrated Bradford&nbsp;Ltd., companies that manage school building programs in the North East of England, and as a director of Tanfield. Since 2001, Dr.&nbsp;Bridge has provided
consulting services to various central and local governmental bodies. From June 2001 to March 2011, Dr.&nbsp;Bridge served as Chairman of Endeavour&nbsp;Plc, a private finance initiative company
in the healthcare sector. From October 2006 to June 2010, Dr.&nbsp;Bridge also served as Chairman of the Agriculture and Horticulture Development Board, an organization providing research and
development and knowledge transfer services to the agricultural and horticultural sectors in the United Kingdom. Dr.&nbsp;Bridge served as Chairman of Land Trust, an organization that develops land
for public use, from September 2004 to June 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dr.&nbsp;Bridge
was selected to serve on our board of directors because of his economics background and extensive experience in both the public and private sectors. We believe that
Dr.&nbsp;Bridge's focus on and experience with issues including change management, risk management and strategic planning contributes important perspective and expertise to our board. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Robert&nbsp;J. Druten</I></FONT><FONT SIZE=2> has served as a director since November 2011. Mr.&nbsp;Druten served as the Executive Vice President and Chief
Financial Officer of Hallmark Cards,&nbsp;Inc., or Hallmark, from 1994 until his retirement in August 2006. Mr.&nbsp;Druten previously served in various executive and corporate development roles
at Hallmark. Prior to joining Hallmark, Mr.&nbsp;Druten served in various corporate development and accounting roles at Pioneer Western Corporation, Kansas City Southern Industries </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>108</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>and
Arthur Young&nbsp;&amp;&nbsp;Co. Mr.&nbsp;Druten currently serves on the boards of directors of Alliance Holdings&nbsp;GP,&nbsp;LP, the managing general partner of Alliance
Holdings&nbsp;GP,&nbsp;LLC, which is indirectly engaged in the production and marketing of coal to utilities and industrial users, where he is a member of the audit and conflicts committees;
Kansas City Southern, a transportation company, where he is the audit committee chairman, finance committee chairman and a member of the nominating and governance committee; and Entertainment
Properties Trust, a real estate investment trust, where he is the chairman of the board and a member of the compensation, nominating and governance, and finance committees. Mr.&nbsp;Druten served as
a director of AIPC from December 2007 to July 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Druten
was selected to serve on our board of directors because of his extensive experience as the principal financial officer and a board member of public companies, which led
to his expertise in public accounting, internal controls, financial reporting and the preparation of financial statements. Furthermore, as a member of the Entertainment Properties Trust board of
directors, Mr.&nbsp;Druten has helped guide a company through the registration process and its early stages as a public company. We believe that these experiences will enable Mr.&nbsp;Druten to
help guide our strategic direction as a public company and our audit committee's oversight of our financial reporting processes. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Darren Kell</I></FONT><FONT SIZE=2> has served as a director since August 2009. Mr.&nbsp;Kell has served as the Chief Executive Officer of Tanfield since
September 2006 and has served as a Tanfield director since December 2003. Mr.&nbsp;Kell had served as Tanfield's Business Development Director from 2003 to September 2006. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Kell
was selected to serve on our board of directors because he possesses 20&nbsp;years of experience in senior management positions at sales and manufacturing companies,
during which he has developed expertise in business-to-business sales and marketing strategies, business generation and intellectual property development in connection with
commercial electric vehicles. We believe that Mr.&nbsp;Kell's expertise in these areas allows him to meaningfully contribute to the development and review of our strategic plans. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Thomas&nbsp;T. Stallkamp</I></FONT><FONT SIZE=2> has served as a director since November 2011. Since June 2004, Mr.&nbsp;Stallkamp has served as the founder
and a principal of Collaborative Management&nbsp;LLC, a private supply chain consulting firm. From June 2004 to December 2010, Mr.&nbsp;Stallkamp served as an industrial partner for Ripplewood
Holdings&nbsp;LLC, a private equity firm specializing in the automotive, financial, manufacturing and media sectors. Mr.&nbsp;Stallkamp has held numerous management, executive and board positions
with companies including MSX International,&nbsp;Inc., a global provider of technology-driven engineering, business and specialized staffing services; DaimlerChrysler Corporation, including as
president of DaimlerChrysler Corporation; and Ford Motor Company. Mr.&nbsp;Stallkamp currently serves on the board of trustees of EntrepreneurShares Series Trust, a registered investment company;
and the boards of directors of Baxter International,&nbsp;Inc., where he is a member of the audit and compensation committees; and BorgWarner,&nbsp;Inc., a developer of powertrain technologies,
where is a member of the audit committee. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Stallkamp
was selected to serve on our board of directors because he possesses more than 40&nbsp;years of experience in the automotive industry in executive and management
roles for OEMs&nbsp;and auto manufacturers. Mr.&nbsp;Stallkamp's experience managing complex international organizations, including manufacturing operations and procurement and supply chain
logistics for Ford and Chrysler, provide him with the international perspective, industry insight, financial acumen and managerial expertise needed to help lead our board of directors. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> BOARD COMPOSITION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors currently consists of six members. Our by-laws permit our board of directors to establish by
resolution the authorized number of directors, and seven directors are currently authorized. The members of our board of directors were elected in compliance with the provisions of our amended and
restated voting and drag-along agreement. This agreement will </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>109</FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>terminate
upon the closing of this offering and there will be no further contractual obligations regarding the election of our directors. We are in the process of identifying additional independent
directors to join our board of directors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of the closing of this offering, our certificate of incorporation will provide for a classified board of directors consisting of three classes of directors, as nearly equal in size as
is practicable. The members of each class will serve for staggered three-year terms, expiring at the first, second and third regularly-scheduled annual meetings of our stockholders
following the closing of this offering. Upon the closing of this offering, the members of the classes will be divided as follows: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the class&nbsp;I directors will be&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, and their term will expire at the annual
meeting of stockholders to
be held in 2012;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the class&nbsp;II directors will be&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, and their term will
expire at the annual meeting of stockholders to
be held in 2013; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the class&nbsp;III directors will be&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, and their term will
expire at the annual meeting of stockholders
to be held in 2014. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
expiration of the term of a class of directors, directors for that class will be elected for three-year terms at the annual meeting of stockholders in the year in which
that term expires. Each director will serve until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal. Our certificate of incorporation and
by-laws
provide that our directors may be removed only for cause by the affirmative vote of holders of at least a majority of the votes that all of our shareholders would be entitled to cast in an annual
election of directors. Any vacancy or on our board of directors, including a vacancy resulting from an increase in the authorized number of directors, may be filled only by the vote of a majority of
our directors then in office. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> DIRECTOR INDEPENDENCE  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon the completion of this offering, we expect that our common stock will be listed on The Nasdaq Global Market. Under
Rule&nbsp;5605(b)(1) of the Nasdaq Stock Market, independent directors must comprise a majority of a listed company's board of directors within one year of listing. Additionally, Nasdaq rules
require that, subject to specified exceptions, each member of a listed company's audit, compensation and nominating and governance committees be independent. Audit committee members must also satisfy
the independence criteria set forth in Rule&nbsp;10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Under Nasdaq Stock Market Rule&nbsp;5605(a)(2), a
director will qualify as an "independent director" only if, in the opinion of that company's board of directors, that person does not have a relationship that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director. In order to be considered to be independent for purposes of Exchange Act Rule&nbsp;10A-3, a member of an audit
committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (1)&nbsp;accept, directly or
indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2)&nbsp;be an affiliated person of the listed company or any of its
subsidiaries. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2011,
our board of directors undertook a review of its composition, the composition of its committees and the independence of each of our directors. Based upon
information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our board of directors determined that none of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
representing&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;of our six directors, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director
and that each of these directors is "independent" as that term is defined under Nasdaq Stock Market Rule&nbsp;5605(a)(2). In making this determination, our board of directors considered the
relationships that each non-employee director has </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>110</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>with
our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each
non-employee director. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> BOARD LEADERSHIP STRUCTURE  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Hansel, our President and Chief Executive Officer, was appointed as Chairman of our board of directors in November 2011. As
our President and Chief Executive Officer since our inception, Mr.&nbsp;Hansel has been a constant and integral part of the leadership of our board and company, and he is the director most familiar
with our business, industry and the challenges facing our company. Our board believes that Mr.&nbsp;Hansel is best situated to ensure that the board's attention and efforts are focused on the most
critical matters. Mr.&nbsp;Hansel's combined role ensures clear accountability, enables decisive leadership and enhances our ability to communicate our message and strategy clearly and consistently
to our stockholders, employees, customers and suppliers, particularly during our transition from being a privately-held company to a public company. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;was
appointed to serve as our "Lead Independent Director" in&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2011. The duties of the Lead Independent Director include: establishing
board meeting agendas
with the Chairman; presiding at all meetings of the board in the absence of, or upon the request of, the Chairman; calling and presiding at all meetings of the non-management directors in
executive session; advising the Chairman and Chief Executive Officer on issues discussed at executive sessions of non-management directors; advising the nominating and corporate governance
committee and the Chairman on the membership of the various board committees and the selection of committee chairmen; advising the Chairman on the retention of board advisors and consultants;
reviewing with the Chief Executive Officer the non-management directors' annual evaluation of his performance; serving as a liaison between the non-management directors and the
Chairman; serving as a liaison between the board and our stockholders; and selecting an interim Lead Independent Director for meetings at which he cannot be present. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
board believes that its leadership structure is appropriate because it strikes an effective balance between strategy development, independent leadership and management oversight in
the board process. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> BOARD COMMITTEES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance
committee. Each committee will operate under a charter that has been approved by our board of directors and will have the responsibilities described below. The members of each committee will be
appointed prior to the closing of this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Audit committee  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each director who is appointed to serve on our audit committee will satisfy the requirements for financial literacy of The Nasdaq Stock
Market. Our board of directors has determined that Mr.&nbsp;Druten is an audit committee financial expert, as defined by SEC rules, and satisfies the financial sophistication requirements of The
Nasdaq Stock Market. Our audit committee's responsibilities include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>overseeing our accounting and financial reporting processes and the audits of our financial statements; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>reviewing and approving our independent auditor's qualifications and independence;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>evaluating the performance of our internal audit function and the adequacy and effectiveness of our control policies and
procedures; </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>111</FONT></P>

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<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>ensuring our compliance with tax, legal and regulatory requirements; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>preparing the report required by SEC rules for inclusion in our annual proxy statement. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> Compensation committee  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our compensation committee's responsibilities include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>discharging the responsibilities of the board of directors relating to compensation of our executive officers and
directors;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>administering our equity and incentive-based compensation plans;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>preparing the annual report on executive compensation for inclusion in our annual proxy statement, in accordance with
applicable SEC rules and regulations; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>reviewing and discussing with management the Compensation Disclosure and Analysis required by rules and regulations of the
SEC. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> Nominating and corporate governance committee  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our nominating and corporate governance committee's responsibilities include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>identifying individuals qualified to become members of the board of directors;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>recommending to the board of directors the persons to be nominated for election as directors at any meeting of our
stockholders at which directors are elected;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>developing and recommending a set of corporate governance principles applicable to our board of directors and regularly
reviewing and recommending proposed changes to such corporate governance principles;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>recommending the members for each board committee to our board of directors; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>overseeing the evaluation of the board of directors and management. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> CODE OF BUSINESS CONDUCT AND ETHICS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have adopted a Code of Business Conduct and Ethics that applies to all of our directors, officers and employees, including our
president and chief executive officer, chief financial officer and other principal executive and senior financial officers. Following this offering, a copy of the Code will be available on our
website, which is located at www.smithelectric.com. To the extent permitted by SEC and Nasdaq rules and regulations, we intend to disclose information as to any amendments to the Code and any waivers
from provisions of the Code for our principal executive officer, principal financial officer, and certain other officers by posting the information on our website. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> DIRECTOR COMPENSATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as noted in the table below, our directors do not currently receive any cash compensation for their services as directors or as
board committee members. Except for the payments to Mr.&nbsp;Stanley identified below, we did not pay any other fees, make any equity awards, or pay any other compensation to our
non-employee directors in fiscal year 2010 for their
service as directors. The compensation that we paid to our President and Chief Executive Officer, our Chief Technology Officer and Senior Vice President and our former Chief Financial Officer, who
also were directors during 2010, is discussed in the "Executive Compensation" section of this prospectus. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>112</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth information regarding compensation earned by our non-employee directors during 2010: </FONT></P>
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<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Fee Earned or<BR>
Paid in Cash ($) </B></FONT></TH>
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<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total ($) </B></FONT></TH>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>John&nbsp;N. Bridge</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Darren Kell</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bruce Shalett(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Roy Stanley(2)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>74,189</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>74,189</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Shalett
resigned from the board of directors effective March&nbsp;2, 2010.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>During
2010, we paid Mr.&nbsp;Stanley a monthly fee of 4,000 British pounds sterling for his services as a director. The U.S. dollar value was calculated
based on the U.S. Internal Revenue Service Yearly Average Currency Exchange Rates for 2010 of 0.647 pounds to the dollar. Mr.&nbsp;Stanley also received a bonus of $100,000 in April 2011 following
the successful completion of our Series&nbsp;B preferred stock financing and a bonus of $150,000 in November 2011 following the successful completion of our Series&nbsp;C preferred stock financing
and the transition to Smith Power and Smith Drive systems in the U.S. Mr.&nbsp;Stanley resigned from the board of directors effective November&nbsp;4, 2011. </FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
early 2011, management and our board of directors determined that it was advisable for us to implement new arrangements, to be effective upon the closing of this offering, for the
compensation of directors who are not employed by us or any of our subsidiaries. We retained Mercer&nbsp;LLC, a compensation consulting firm, to advise us on structuring compensation packages
competitive with companies of similar size, in similar industries or markets and at the same stage of maturity as us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mercer
analyzed market data compiled from the following companies, which we refer to as our Comparator Group, in order to develop a recommended non-employee director
compensation program: </FONT></P>
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<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="39%" style="font-family:times;"></TD>
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<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>A123 Systems,&nbsp;Inc.</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Evergreen Solar,&nbsp;Inc.</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>American Superconductor Corporation</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Fuel Systems Solutions,&nbsp;Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>Amyris,&nbsp;Inc.</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>GT Advanced Technologies,&nbsp;Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>Amtech Systems,&nbsp;Inc.</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>iRobot Corporation</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>Broadwind Energy,&nbsp;Inc.</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Spartan Motors,&nbsp;Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>Clean Energy Fuels Corp.</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Tesla Motors,&nbsp;Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>Ener1,&nbsp;Inc.</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Westport Innovations&nbsp;Inc.</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Energy Conversion Devices,&nbsp;Inc.</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>Winnebago Industries,&nbsp;Inc.</FONT></TD>
</TR>
</TABLE></DIV>
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 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
on Mercer's recommendation, our board of directors adopted a non-employee director compensation policy that will become applicable to all of our
non-employee directors upon the closing </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>113</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>of
this offering. The following table summarizes the terms of the compensation arrangements to which our non-employee directors will be entitled: </FONT></P>
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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Cash compensation</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Annual cash retainer</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>30,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Supplemental cash retainer for Chairman</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>50,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Supplemental cash retainer for Lead Independent Director</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash retainer for service as board committee chair</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Chair of audit committee</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Chair of compensation committee</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Chair of nominating and corporate governance committee</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Board meeting fee(1)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,500</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Committee meeting fee(2)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,250</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Equity compensation</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Annual equity grant</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>60,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Represents
the per meeting fee payable for attendance at more than six board meetings per year.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Represents
the per meeting fee payable for attendance at more than six committee meetings per year. </FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;John&nbsp;N. Bridge, Bruce Shalett and Roy Stanley served on our compensation committee during our fiscal year ended
December&nbsp;31, 2010. Neither Mr.&nbsp;Shalett nor Mr.&nbsp;Stanley currently serves on our board of directors. No such member of our compensation committee is or has been a current or former
officer or employee of ours. Messrs.&nbsp;Shalett and Stanley had material interests in transactions with us that are reported under "Relationships and Related Person Transactions."
Dr.&nbsp;Bridge did not have any such interests. None of our executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of
any other entity, one of whose executive officers served as a director or member of our compensation committee during our fiscal year ended December&nbsp;31, 2010. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>114</FONT></P>

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</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ea78101_executive_compensation"> </A>
<A NAME="toc_ea78101_1"> </A>
<BR></FONT><FONT SIZE=2><B>  EXECUTIVE COMPENSATION    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> COMPENSATION DISCUSSION AND ANALYSIS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>The following discussion and analysis of compensation arrangements of our named executive officers for 2010 and
2011 should be read together with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current considerations,
expectations, and determinations regarding future compensation programs. The actual amount and form of compensation and the compensation programs that we adopt may differ materially from current or
planned programs as summarized in this discussion.</I></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Compensation philosophy  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to be a leading global producer of medium-duty commercial electric vehicles. In order to achieve this goal, we
must attract, retain and motivate talented, qualified and committed executive officers who share our philosophy and are willing to work toward this goal. However, as an early stage company we often
have not been in a position to immediately provide our executive officers with total compensation that is competitive with that offered by the companies with which we compete for talent. Instead, we
typically have hired our executive officers at compensation levels that were lower, and in some cases substantially lower, than the compensation paid to similarly situated executives in our industry
and geographic market, and increased our executives' compensation following the completion of financing transactions. This is particularly true for the executives who have been with us since early
2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Given
our limited operating history, we have not yet developed a formal compensation philosophy or program; however, the following general principles guide our executive compensation
decisions: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Executive compensation should reflect our financial position. Prior to this offering, we have relied on private financings
for working capital and have experienced periods of limited cash availability. As a result, we have structured our executives' total compensation to reflect our limited capital resources. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Our executive team generally should be compensated equitably relative to one another, based upon their respective duties
and their relative levels of responsibility and performance.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Our executives should bear financial risk, and reap financial reward, for the growth and success of our company. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
early 2011, we retained Mercer to review our existing executive compensation program and work with our management to develop an executive compensation program that positions us to
compete for and retain executive talent, grow our business and create stockholder value as a public company. This is an ongoing process, the goals of which include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Establishing a compensation program structure to attract and retain highly qualified executive officers. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Developing compensation guiding principles, including a comparative peer group and targeted market positioning for
different compensation elements.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Harmonizing salary, equity awards, and other compensation benefits for executive officers hired under different
circumstances.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Continuing to align executive officer compensation, both in individual cases and as a team, to the long-term
interests of stockholders.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Developing a flexibility that permits the accommodation of appropriate individual circumstances. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>115</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Emphasizing clear, easily-measured performance goals to help align executive officer compensation with the
long-term interests of stockholders. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> Named executive officers  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following persons are our "named executive officers" for 2010, as determined in accordance with SEC regulations. </FONT></P>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bryan&nbsp;L. Hansel</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>President&nbsp;and&nbsp;Chief&nbsp;Executive&nbsp;Officer</FONT></TD>
</TR>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Paul&nbsp;R. Geist(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Chief Financial Officer</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Kevin Kelly(2)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Former Chief Financial Officer</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robin&nbsp;J. Mackie</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Chief Technology Officer and Senior Vice President</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Jacques&nbsp;D. Schira</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>General Counsel</FONT></TD>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Ben Kevin Neal</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>Vice&nbsp;President&nbsp;of&nbsp;Human&nbsp;Resources&nbsp;and&nbsp;Administration</FONT></TD>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Geist
became our Chief Financial Officer on November&nbsp;22, 2010.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Kelly
resigned as our Chief Financial Officer effective August&nbsp;15, 2010. </FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> Historical process for determining compensation for our executive officers  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Compensation for our executive officers historically has been individualized and has been based on a variety of factors, including, in
addition to the principles listed above, our need for that particular executive position. Our executive officers' compensation generally is established at the time the executives begin employment with
us and is memorialized in an employment agreement or offer letter. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior
to offering employment to an executive, our Vice President of Human Resources and Administration reviews multiple subscription-based and public compensation analyses that include
data for comparable executive positions in the Midwestern portion of the United States and at companies with which we believe we compete for executive talent. Once we have determined a market
compensation range for the position, our President and Chief Executive Officer weighs this information with our financial position, the candidate's experience and then-current
compensation, and how the market compensation range compares to the compensation we provide to our other executives, in order to develop a proposed compensation package for the position. This
compensation package then is subject to negotiation with the executive officer candidate. Once management and the executive officer candidate have reached agreement on the terms of the candidate's
compensation, our President and Chief Executive Officer presents the proposed arrangement to our board of directors for approval. The board retains the discretion to modify the terms of any such
proposed arrangement. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After
establishing an executive officer's total compensation at the time of hire, our board of directors, upon the recommendation of our President and Chief Executive Officer, may from
time to time increase the executive's compensation. These increases typically follow the completion of financing transactions and have been based on our President and Chief Executive Officer's
determination that the increases are merited based on our financial position, the executives' performance and their respective compensation levels relative to the rest of our executive team, and our
understanding of the relevant market for the executives' positions. Our board of directors has not, however, historically undertaken a systematic annual review of executive officer compensation. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
currently do not have any policies for allocating compensation between long-term and short-term compensation or cash and non-cash compensation. Our
mix of compensation elements is designed to reward recent results and motivate long-term performance through a combination of cash and equity awards. Prior to 2011, following an initial
equity grant in connection with commencement of an executive officer's employment, we have not granted equity awards to our executives on an annual </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>116</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>or
other regular basis. As a result of the historically infrequent grants of equity awards to our executive officers, we have not taken a systematic approach to targeting base salary and cash bonus as
a certain proportion of total compensation. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> 2011 executive employment agreements  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between September and November 2011, we entered into new employment agreements with each of our named executive officers, other than
Robin Mackie, who entered into an employment agreement with Smith Europe in November 2011. We entered into these new agreements in order to more closely align the benefits, including the severance
benefits, we provide to, and the restrictive covenants imposed on, our named executive officers. See "&#151;Agreements with Executives" for descriptions of these agreements. The principal
economic terms of our arrangements with our named executive officers, such as base compensation, bonus eligibility and severance benefits, were relatively unchanged by our entry into these new
employment agreements. The principal differences between the agreements we entered into in 2011 and our named executive officers' prior employment agreements follow: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the maximum discretionary performance bonus that may be paid to a named executive officer for any year is no longer set at
100% of base salary; instead, this maximum performance bonus payout, as well as the performance targets applicable to the bonus opportunity, are determined annually by our President and Chief
Executive Officer or our board of directors or compensation committee;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>we no longer provide any of our named executive officers with severance benefits upon the termination of their employment
with us by mutual agreement; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>in order to receive severance benefits under the new agreement, a named executive officer whose employment with us has
terminated is required to execute, deliver to us and not revoke a release of claims agreement. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> Compensation elements  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Given that we are an early stage company with limited resources and without publicly-traded equity securities, the primary focus of our
executive compensation program has been on attracting and retaining executive talent primarily through cash compensation in the form of base salary and bonuses. However, we also have made limited
equity grants in the form of stock options and restricted stock to our named executive officers and provide our named executive officers with severance benefits. Our named executive officers are
eligible to participate in our employee benefit plans and we also provide our named executive officers with certain perquisites our management and board of directors determines are reasonable and
appropriate. A description and the intended purpose of each of these compensation elements follows. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> Base salary  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We use base salaries to recognize the experience, skills, knowledge and responsibilities of our employees, including our named
executive officers. Base salaries for our named executive officers are established through negotiation at the time the executive is hired, taking into account the benchmarking data discussed above,
the executive's qualifications, experience and prior salary. None of our executive officers is currently party to an employment agreement that provides for automatic or scheduled increases in base
salary and no formulaic base salary increases are provided to our named executive officers. Our board of directors does, however, have the discretion to evaluate and adjust upwards the base salary of
each named executive officer based on the scope of an executive's responsibilities, individual contribution, prior experience and sustained performance. Any decision regarding salary increases may,
but need not, take into account the executive's current salary, equity ownership and the amounts paid to an executive's peers inside our company. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>117</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
November 2011 our board of directors approved base salary increases of $75,000 for our President and Chief Executive Officer and our Chief Technology Officer and Senior Vice
President. In
determining to approve these increases, the board considered these executives' significant contributions to growing our company since our inception in January 2009, particularly as related to our
recent financing activities, customer wins and transition to our Smith Power and Smith Drive systems in the U.S., and their respective total compensation levels as compared to similarly situated
executives at Comparator Group companies. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth information regarding the annual base salary for fiscal years 2010 and 2011 for our named executive officers. Each named executive officer's base salary,
other than Mr.&nbsp;Mackie's base salary, was initially established in his employment agreement. Prior to November&nbsp;8, 2011, Mr.&nbsp;Mackie provided services to us pursuant to an oral
agreement, which included an understanding regarding his base compensation. </FONT></P>
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<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Fiscal 2010 Base Salary </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Fiscal 2011 Base Salary </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bryan&nbsp;L. Hansel(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>350,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>425,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Paul&nbsp;R. Geist</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>265,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>265,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Kevin Kelly(2)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>175,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robin&nbsp;J. Mackie(3)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>250,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>325,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Ben Kevin Neal</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>175,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>175,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Jacques&nbsp;D. Schira</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>225,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>225,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Hansel's
base salary was increased to $425,000 effective November&nbsp;4, 2011. Prior to this increase, his base salary was $350,000.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Kelly
resigned as our Chief Financial Officer effective August&nbsp;15, 2010.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Mackie's
base compensation was increased to $250,000 effective April&nbsp;1, 2010 and to $325,000 effective November&nbsp;8, 2011. Prior to
these increases, his base compensation was $204,167 and $250,000, respectively. </FONT></DD></DL>
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 <P style="font-family:times;"><FONT SIZE=2><B><I> Cash bonuses  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We historically have paid cash bonuses to our executive officers following the completion of financing transactions, as we then have
the resources available to do so. These bonuses have been paid at the discretion of our President and Chief Executive Officer and our board of directors, and the amounts paid were determined at the
time the bonuses were approved. We use cash bonuses to reward our executive officers for their work in accomplishing our corporate goals and growing our company and to more closely align their total
compensation with the compensation paid to similarly situated executives in our industry and geographic market. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
employment agreements we entered into when we hired our named executive officers (other than Mr.&nbsp;Mackie, who provided services to us pursuant to an oral agreement until
November&nbsp;8, 2011) provided for a discretionary annual performance bonus opportunity equal to 100% of their respective base salaries that would be paid based on the achievement of individual and
corporate goals. These goals were established in the executives' employment agreements or were to be determined by our management team and approved by the board of directors prior to the relevant
performance year. To date, we have not provided any of our named executive officers with an annual performance bonus opportunity tied to specific performance goals due to our limited financial
resources. Our management team annually establishes strategic operational, financial and other goals for our company, which are reviewed and, as needed, revised, quarterly, but these goals are not
established or tracked for purposes of determining our executives' bonuses. As discussed under "&#151;2011 executive employment agreements," the employment agreements we and our named executive
officers entered into in 2011 </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>118</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>also
provide for a discretionary annual performance bonus opportunity that would be paid based on the achievement of individual and corporate goals. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the cash bonuses we paid to our named executive officers in 2010. The bonuses were paid following the closing of our Series&nbsp;A debenture financing. </FONT></P>
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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 Bonus Amount </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bryan&nbsp;L. Hansel</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Paul&nbsp;R. Geist(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Kevin Kelly</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robin&nbsp;J. Mackie</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>65,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Ben Kevin Neal</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>20,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Jacques&nbsp;D. Schira</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Geist
was hired as our chief financial officer after bonuses were paid for 2010. </FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
order to encourage Mr.&nbsp;Geist to join us, we agreed to pay Mr.&nbsp;Geist two nondiscretionary bonuses based on retention and our achievement of goals related to our initial
public offering. Mr.&nbsp;Geist is entitled to a guaranteed bonus of $100,000 if he remains employed by us through October&nbsp;1, 2011, which we paid to Mr.&nbsp;Geist in October 2011.
Additionally, Mr.&nbsp;Geist is eligible to receive a cash bonus equal to 100% of his base salary, with 50% of such bonus becoming due and payable if a registration statement for our initial public
offering is filed with the SEC on or prior to October&nbsp;21, 2012 and the remaining 50% becoming due and payable if we complete our initial public offering by October&nbsp;21, 2012. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Equity grants  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We offer long-term incentives to our named executive officers through grants of stock options and restricted stock. We
primarily use stock options and restricted stock to compensate our named executive officers in the form of initial grants in connection with the commencement of employment. We also made stock option
grants to our executive officers in April 2011 and to certain of our executive officers in November 2011, following the closing of our Series&nbsp;B financing and the closing of our 2011convertible
notes financing and launch of our second generation Smith Newton, respectively. See "&#151;2011 bonuses and equity awards." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior
to this offering, our executives were eligible to participate in our 2009 Incentive Compensation Plan. Following the closing of this offering, our executives will be eligible to
receive stock-based awards pursuant to our 2012 Incentive Plan. Under the 2012 Incentive Plan, our executives are eligible to receive grants of stock options, stock appreciation rights, shares of
restricted stock, restricted stock units and any other form of stock-based awards. The plan also permits cash incentive awards. See "&#151;Equity Compensation Plans" for a description of the
2009 Incentive Compensation Plan and 2012 Incentive Plan. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior
to our November 2011 stock option grants, the stock options and restricted shares we have granted to our executives generally cliff vest on the second anniversary of the grant
date, and vesting is accelerated upon a change in control of us, an initial public offering of our stock or the existence of "good reason." The stock options we granted in November 2011 vest as to 50%
of the shares covered by the options on the first anniversary of the grant date and vest as to the remaining 50% of the covered shares on the second anniversary of the grant date. Vesting of these
options accelerates upon a change of control of us or if "good reason" exists. Good reason generally exists if we (i)&nbsp;materially reduce a named executive officer's compensation or position,
duties or responsibilities, (ii)&nbsp;assign duties materially inconsistent with a named executive officer's position, (iii)&nbsp;materially and adversely change a named executive officer's
reporting relationships, (iv)&nbsp;require the named executive officer to be based </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>119</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
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<BR>

<P style="font-family:times;"><FONT SIZE=2>at
a location more than 75 miles from the office at which the executive was based when the grant was made or (v)&nbsp;materially breach any employment agreement we have entered into with the named
executive officer. Vesting is also accelerated if a named executive officer is terminated without cause or as a result of death or disability or if a named executive officer resigns for good reason.
In such a case, stock options will become exercisable for the 120&nbsp;days following the termination of employment. "Cause" generally exists if the named executive officer has (a)&nbsp;been
grossly negligent or engaged in willful misconduct, fraud, embezzlement, acts of dishonesty or a conflict of interest relating to our affairs; (b)&nbsp;been convicted of or pleaded nolo contendere
to any crime relating to our business affairs; or (c)&nbsp;engaged in a willful violation of any federal or state securities laws. A named executive officer will forfeit all unvested equity awards
if he or she is terminated for cause or resigns without good reason. Prior to the exercise of a stock option, the holder has no rights as a stockholder with respect to the shares subject to such
option, including voting rights or the right to receive dividends or dividend equivalents. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
do not have any equity ownership guidelines for our executives, but believe that equity grants provide our executives with a strong link to our long-term performance,
create an ownership culture and help to align the interests of our executives and our stockholders. In particular, because employees profit from stock options only if our stock price increases
relative to the stock option's exercise price, we believe stock options provide meaningful incentives to employees to achieve increases in the value of our stock over time. Additionally, the vesting
feature of our equity grants contributes to executive retention by providing an incentive to our executives to remain in our employ during the vesting period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have historically granted stock options at exercise prices of no less than the fair market value of shares of our common stock on the date of grant as determined by our management or,
with respect to stock options granted under our 2009 Incentive Compensation Plan, our compensation committee. The exercise price of all stock options granted after the closing of this offering will be
equal to the fair market value of shares of our common stock on the date of grant, which generally will be determined by reference to the market price of our common stock. We historically have not had
a program, plan or practice of selecting grant dates for equity incentive awards to our executive officers in coordination with the release of material non-public information. As a
privately-held company, there has been no market for our common stock. Accordingly, to date we do not have a program, plan or practice pertaining to the timing of stock option grants to
executive officers coinciding with the release of material non-public information. Following this offering, we intend
for all equity awards we grant to be granted shortly after publication of our quarterly or annual earnings releases. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> Severance benefits  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreed in each of our named executive officer's employment agreement, under certain circumstances, to provide such executives
severance benefits and/or accelerated vesting of equity awards if their respective employment terminates. We believe that providing these benefits to our named executive officers incentivizes them to,
among other things, cooperate in negotiating any change of control, including a change of control in which they believe they may lose their jobs. See "&#151;Potential Payments Upon Termination
or Change of Control" and "&#151;Agreements with Executives" for a description of these benefits and our named executive officers' employment agreements. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> Benefits and perquisites  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain broad-based welfare benefits that are made available to all employees from time to time and subject to the terms of the
applicable plan, including our medical, dental and vision care plans, life and accidental death and dismemberment insurance policies and long-term and short-term disability
plans. These benefits are designed to attract and retain employees and provide security for their health and welfare needs. Our named executive officers are eligible to participate in each of these </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>120</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
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<BR>

<P style="font-family:times;"><FONT SIZE=2>programs
on the same terms as non-executive employees, except that we pay 100% of the premiums for our U.S.-based named executive officers' medical and dental insurance coverage, whereas
we pay only 70% of such premiums for our U.S.-based employees generally. We do not at this time offer any retirement benefits. We also provide our executive officers with perquisites that we believe
complement other compensation vehicles and enable us to attract and retain key executives. These perquisites include automobile allowances, company-paid cell phone plans, airline club
memberships, use of a corporate apartment and reimbursement of commuting expenses. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> 2011 bonuses and equity awards  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We paid cash bonuses and granted stock options to our named executive officers in April and to certain of our executive officers in
November 2011. Our President and Chief Executive Officer recommended and our board of directors approved cash bonuses and stock option grants to Messrs.&nbsp;Hansel, Mackie, Neal and Schira
following the completion of our Series&nbsp;B financing and the completion of our 2011 convertible notes financing and the launch of our second generation Smith Newton. Mr.&nbsp;Geist received
stock option and restricted stock grants in April 2011 in respect of a sign-on equity award and we paid Paul Geist a $100,000 retention bonus provided for under his employment agreement in
October 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
options granted to Messrs.&nbsp;Hansel, Mackie, Neal and Schira in April 2011 will vest on March&nbsp;8, 2013, and the options and restricted shares granted to Mr.&nbsp;Geist
in April 2011 will vest on November&nbsp;22, 2012, or in either case, immediately upon a change of control of us or the completion of this offering or if good reason exists. The stock options we
granted in November 2011 vest as to 50% of the shares covered by the options on the first anniversary of the grant date and vest as to the remaining 50% of the covered shares on the second anniversary
of the grant date. Vesting of these options accelerates upon a change in control of us or if good reason exists. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
cash and stock option awards made to our named executive officers to date in 2011, and the mix of cash and options included in the total award amounts, were intended to reward our
executives for their efforts in connection with our financing and operational successes, provide our executives significant cash payments at times when we had the resources available to do so and also
to foster retention, help further align our executives' interests with those of our stockholders and to motivate our executives to continue to work towards our initial public offering. The stock
option grants made to Messrs.&nbsp;Neal and Schira in November 2011 also were intended to return their equity interests in our company to approximately one percent of our fully diluted common stock. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>121</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth information regarding the cash bonuses paid and restricted stock and stock options granted to our named executive officers to date in 2011. </FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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</FONT></P>

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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="94pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="93pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="112pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="67pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=11 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Equity Awards </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:21pt;"><FONT SIZE=1><B>Name

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Cash Bonus </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Grant Date </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Restricted Stock<BR>
(Number of Shares) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Option Grants (Number<BR>
of Underlying Shares) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Exercise Price<BR>
of Options </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Bryan&nbsp;L. Hansel</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>325,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>April&nbsp;29, 2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>30,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12.04</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>November&nbsp;4, 2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>100,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12.38</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Paul&nbsp;R. Geist</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>100,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>April&nbsp;29, 2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>101,422</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>November&nbsp;4, 2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Kevin Kelly(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robin&nbsp;J. Mackie</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>275,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>April&nbsp;29, 2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>30,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12.04</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>November&nbsp;4, 2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>65,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12.38</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Ben Kevin Neal</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>97,500</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>April&nbsp;29, 2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12.04</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


</FONT>
</TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>November&nbsp;4, 2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>100,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12.38</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Jacques&nbsp;D. Schira</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>122,500</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>April&nbsp;29, 2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12.04</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>November&nbsp;4, 2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>100,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12.38</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
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<HR NOSHADE  COLOR="#000000" SIZE="1.0PT" WIDTH="26%" ALIGN="LEFT" >


<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Kelly
resigned as our Chief Financial Officer effective August&nbsp;15, 2010 and was not considered for a bonus. </FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> Role of the compensation committee in setting executive compensation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, our President and Chief Executive Officer and our entire board of directors have assumed responsibility for our executive
compensation program. Going forward, our compensation committee will assume this responsibility and will have the overall responsibility for recommending to our board of directors the compensation of
our President and Chief Executive Officer and determining the compensation of our other executive officers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Tax considerations  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;162(m) of the Internal Revenue Code of 1986, as amended generally will disallow a tax deduction for compensation in
excess of $1.0&nbsp;million paid to our President and Chief Executive Officer and our three other most highly paid executive officers (other than our Chief Financial Officer) unless such
compensation is "performance-based" under Section&nbsp;162(m). However, under a Section&nbsp;162(m) transition rule for compensation plans or agreements of corporations which are privately held
and which become publicly held in an initial public offering, compensation paid under a plan or agreement that existed prior to the initial public offering will not be subject to Section&nbsp;162(m)
until the earlier of (1)&nbsp;the expiration of the plan or agreement; (2)&nbsp;a material modification of the plan or agreement; (3)&nbsp;the issuance of all employer stock and other
compensation that has been allocated under the plan; or (4)&nbsp;the first meeting of stockholders at which directors are to be elected that occurs after the close of the third calendar year
following the year of the initial public offering. The earlier of such dates is referred to as the "Transition Date." Consequently, we may rely on the exemption from Section&nbsp;162(m) afforded to
us by the transition rule described above for compensation paid pursuant to any pre-existing compensation plans or agreements. After the Transition Date, compensation paid to such
executives will be subject to the limit under Section&nbsp;162(m) unless it is meets the requirements to be qualifying performance-based compensation. We will periodically review the potential
consequences under Section&nbsp;162(m) of paying non-performance based compensation in excess of $1.0&nbsp;million in any year to our executive officers. Our compensation committee
may, in its judgment, authorize compensation payments that do not comply with the exemption in Section&nbsp;162(m) when it believes that such payments are appropriate to attract and retain executive
talent and are in our best interest and that of our stockholders. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>122</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_ea78101_1_123"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> SUMMARY COMPENSATION TABLE  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes the compensation paid to or earned by our named executive officers for 2010. </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="67pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH NOWRAP  COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:102pt;"><FONT SIZE=1><B>Name and Principal Position

<!-- COMMAND=ADD_SCROPPEDRULE,102pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Salary </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Bonus </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>All Other<BR>
Compensation </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Bryan&nbsp;L. Hansel</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>350,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>100,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,668</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>(4)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>478,668</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 President and Chief Executive Officer</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Paul&nbsp;R. Geist(1)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
18,163</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
18,163</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>Chief Financial Officer</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Kevin Kelly(2)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
144,958</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
11,811</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>(5)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
166,769</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>



<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Former Chief Financial Officer</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robin&nbsp;J. Mackie(3)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
238,685</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
65,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
78,512</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>(6)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
382,197</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:0pt;text-indent:-0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>Chief Technology Officer and Senior Vice President</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>



<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Ben Kevin Neal</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
175,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
20,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
16,313</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>(7)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
211,313</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR bgcolor="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:0pt;text-indent:-0pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>


<!-- COMMAND=ADD_ROWSHADECOLOR,"#CCEEFF" -->


 Vice President of Human Resources and Administration</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Jacques&nbsp;D. Schira</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
225,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
10,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
21,064</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>(8)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
256,064</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><I>General Counsel</I></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Geist
became our Chief Financial Officer on November&nbsp;22, 2010, and received a prorated base salary for the remainder of 2010 based on an
annual base salary of $265,000.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Kelly
resigned as our Chief Financial Officer effective August&nbsp;15, 2010.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>The
amount reported in the "Salary" column represents the base compensation paid to Mr.&nbsp;Mackie for his services during 2010. In 2010 we did not
separately provide Mr.&nbsp;Mackie with health or welfare benefits.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Includes
an automobile allowance, a company-paid cellular telephone and data service plan, the payment of health insurance premiums and the
payment of annual dues for Mr.&nbsp;Hansel's membership in professional and other associations and clubs.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Includes
an automobile allowance, a company-paid cellular telephone service plan and the payment of health insurance premiums.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Includes
an automobile allowance, reimbursement of commuting expenses incurred by Mr.&nbsp;Mackie for trips between our Kansas City, Missouri headquarters
and his home in the United Kingdom, reimbursement for the costs of a travel insurance policy, company-paid cellular telephone and data service plans, and the use of our corporate apartment
in Kansas City, Missouri. The amount set forth in the "All Other Compensation" column includes the following amounts paid in 2010 but accrued in 2009: an automobile allowance of $3,000, commuting
expenses of $5,172, and cellular telephone and data service plan costs of $1,676. We reimbursed Mr.&nbsp;Mackie for aggregate commuting expenses of $52,885, which consisted of airfare and rental car
costs. The aggregate cost to the company of Mr.&nbsp;Mackie's use of our corporate apartment was calculated by multiplying the number of nights Mr.&nbsp;Mackie stayed at the apartment by $47,
which is the daily cost to us of the apartment, including rent and utilities.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(7)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Includes
an automobile allowance, a company-paid cellular telephone service plan and the payment of health insurance premiums. </FONT></DD></DL>
 </DIV>
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>
 <DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
<p style="font-family:times;"></FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(8)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Includes
an automobile allowance, a company-paid cellular telephone service plan, the use of our corporate apartment in Kansas City, Missouri
and the reimbursement of health insurance premiums. The aggregate cost to the company of Mr.&nbsp;Schira's use of our corporate apartment was calculated by multiplying the number of nights
Mr.&nbsp;Schira stayed at the apartment by $47, which is the daily cost to us of the apartment, including rent and utilities.  </FONT>
<BR>

<P style="font-family:times;"><FONT SIZE=2>Our
policy is to pay 100% of our executive officers' health insurance premiums. We pay 70% of the health insurance premiums for our other employees, and report in the "All Other Compensation" column
the dollar amount of the difference between 100% and 70% of our named executive officers' health insurance premiums (except for Mr.&nbsp;Mackie, who was not provided with this benefit in 2010
because he procured his own health insurance in the United Kingdom, and Mr.&nbsp;Schira). During 2010, Mr.&nbsp;Schira did not participate in our health insurance program and instead purchased his
own health insurance. We reimbursed Mr.&nbsp;Schira for 100% of his health insurance premiums, which were higher than the premiums that would have been payable under our health insurance plan. The
amount included in the "All Other Compensation" column related to Mr.&nbsp;Schira's health insurance premiums represents the difference between the aggregate amount of premiums reimbursed to
Mr.&nbsp;Schira during 2010 and 70% of the total health insurance premiums that would have been payable by him during 2010 if he had participated in our health insurance plan. </FONT></P>

</DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table reflects all outstanding equity awards held by each of our named executive officers as of December&nbsp;31, 2010: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:57%;margin-left:10%;">
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<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="67pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="65pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="75pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="86pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=14 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Option Awards </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:21pt;"><FONT SIZE=1><B>Name

<!-- COMMAND=ADD_SCROPPEDRULE,21pt -->

 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Date of Grant </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of<BR>
Securities<BR>
Underlying<BR>
Unexercised<BR>
Options (#)<BR>
Exercisable </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of<BR>
Securities<BR>
Underlying<BR>
Unexercised<BR>
Options (#)<BR>
Unexercisable </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Option Exercise<BR>
Price(1) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Option Expiration<BR>
Date </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bryan&nbsp;L. Hansel</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Paul&nbsp;R. Geist</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Kevin Kelly</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robin&nbsp;J. Mackie</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Ben Kevin Neal</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12/18/2009</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>128,344</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.73</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12/18/2019</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(4)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Jacques&nbsp;D. Schira</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12/18/2009</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>128,344</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(3)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.73</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12/18/2019</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(4)</FONT></TD>
</TR>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
2009, we retained a third party valuation firm to determine the fair market value of our common stock, on a non-marketable, minority
ownership basis, as of December&nbsp;1, 2009. The valuation firm determined the fair market value of our common stock to be $0.73 per share as of December&nbsp;1, 2009.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Neal's
option vested on February&nbsp;23, 2011.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Schira's
option vested on March&nbsp;23, 2011.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>In
accordance with the terms of Mr.&nbsp;Schira's and Mr.&nbsp;Neal's stock option agreements, all unvested portions of their stock options terminate
immediately upon termination of the officer's employment. Any vested but unexercised portion of their options terminates upon the earliest to occur of the following: (i)&nbsp;120&nbsp;days
following termination of the officer's employment with us without cause; (ii)&nbsp;immediately upon termination of the officer's employment with us for cause; (iii)&nbsp;12&nbsp;months following
termination of the officer's employment with us by reason of death or disability; (iv)&nbsp;immediately upon on our liquidation, dissolution or reorganization in which we are not a surviving entity;
(v)&nbsp;December&nbsp;18, 2019, which is the expiration date of the option; or (vi)&nbsp;120&nbsp;days following termination of the officer's employment with us for good reason or without
good reason. </FONT></DD></DL>
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</FONT> <FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our named executive officers' employment agreements provide for the compensation and benefits, if any, payable to the executive if his
or her employment with us is terminated or a change of control of us occurs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the payments and benefits that would have accrued to each named executive officer, other than Kevin Kelly, if such named executive officer's employment had
been terminated effective as of December&nbsp;31, 2010, in each of the circumstances identified in the table. Mr.&nbsp;Kelly did not receive any payment or benefits, and all of his previously
granted stock options were cancelled, upon his resignation as our Chief Financial Officer effective August&nbsp;15, 2010. The benefits reflected in the table below are based on the employment
agreements we entered into with our named executive officers, other than Mr.&nbsp;Kelly, in 2011 and, where applicable, the terms of the named executive officers' stock option award agreements. A
named executive officer's receipt of the benefits set forth in the table below is conditioned on the named executive officer executing and not revoking an applicable release of claims agreement with
us. If we had not entered into new employment agreements with our named executive officers in 2011, Mr.&nbsp;Mackie would not be entitled to receive any
benefits upon the termination of his employment or a change in control of us and Mr.&nbsp;Hansel would be entitled to receive $175,000 if his employment was terminated by mutual agreement. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
determined that the fair value of our common stock as of December&nbsp;31, 2010 was $12.04 per share, based on the per share price at which we sold our Series&nbsp;B preferred
stock to unrelated third parties during March 2011, which also is the price at which our Series&nbsp;B preferred stock is convertible into our common stock. In determining this fair value, our board
of directors took into consideration that (i)&nbsp;the Series&nbsp;B preferred stock is convertible into shares of our common stock on a one-to-one basis and has voting
rights, (ii)&nbsp;the Series&nbsp;B preferred stock automatically converts into shares of our common stock at the time of an initial public offering, (iii)&nbsp;the Series&nbsp;B preferred
stock has no </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>125</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
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<BR>

<P style="font-family:times;"><FONT SIZE=2>dividend
rights and is non-interest bearing, and (iv)&nbsp;the Series&nbsp;B preferred stock has certain preferences and rights senior to those of our common stock. </FONT></P>
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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="9pt" style="font-family:times;"></TD>
<TD WIDTH="9pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="72pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="67pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="64pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="78pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH NOWRAP  COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:21pt;"><FONT SIZE=1><B>Name

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Termination by<BR>
Employee<BR>
following<BR>
Change of<BR>
Control </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Termination<BR>
without Cause </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Termination<BR>
for Cause </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Termination<BR>
upon Death or<BR>
Disability </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Resignation<BR>
without Good<BR>
Reason </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Resignation with<BR>
Good Reason(1) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bryan&nbsp;L. Hansel</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Base Salary</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>425,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>425,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>425,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>425,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bonus</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Equity compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>525,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>525,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>525,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>525,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Paul&nbsp;R. Geist</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Base Salary</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>265,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>265,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>265,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>265,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bonus</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Equity compensation(2)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>265,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>265,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>265,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>265,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robin&nbsp;J. Mackie</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Base Salary</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>325,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>325,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>325,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>325,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bonus</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>65,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>65,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>65,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>65,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Equity compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>390,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>390,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>390,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>390,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Ben Kevin Neal</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Base Salary</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>87,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>87,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>87,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>87,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bonus</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>20,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>20,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>20,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Equity compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,451,571</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(3)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,559,071</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>87,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>107,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>107,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Jacques&nbsp;D. Schira</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Base Salary</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>112,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>112,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>112,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>112,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bonus</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(4)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Equity compensation</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,451,571</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(4)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,574,071</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>112,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>122,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>122,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
<DIV style="padding:0pt;position:relative;text-align:left;margin-left:10%;">
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Each
of our named executive officer's employment agreement provides that, upon the termination of his or her employment in this circumstance, he or she
would receive a pro-rated amount of the bonus he or she would have received for the fiscal year in which the termination occurred had he or she remained employed with us. The amounts
reflected are the actual cash bonuses paid in 2010. Given that we have never paid performance bonuses, we believe that including the actual bonuses paid in the table above more accurately reflects the
amounts our named executive officers would receive if their employment was terminated in the events specified in the table than would omitting these bonus payments.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Geist's
stock options and shares of restricted stock were not granted until April 2011.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Neal's
stock options vest and become exercisable immediately upon a change of control of us. The amount reported is equal to the number of shares
of common stock subject to the option multiplied by the difference between the fair market value of our common stock as of December&nbsp;31, 2010 ($12.04 per share) and the exercise price of the
option ($0.73 per share).
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Schira's
stock options vest and become exercisable immediately upon a change of control of us. The amount reported is equal to the number of
shares of common stock subject to the option multiplied by the difference between the fair value of our common stock as of December&nbsp;31, 2010 ($12.04 per share) and the exercise price of the
option ($0.73 per share). </FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the amounts set forth in the table above, in the event of (i)&nbsp;a termination by the executive following a change of control
of us, (ii)&nbsp;a termination without cause, (iii)&nbsp;a termination upon death or disability, or (iv)&nbsp;a resignation with good reason, we have agreed to pay the cost of COBRA family
coverage for our named executive officers other than Mr.&nbsp;Mackie for a period of 12&nbsp;months following the termination date. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>126</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the payments and benefits that would have accrued to each named executive officer, other than Kevin Kelly, if a change of control of us had occurred
effective as of December&nbsp;31, 2010. See the "Termination by Employee following Change of Control" column in the preceding table for the payouts that apply to a termination following a change of
control. Information is not presented for Mr.&nbsp;Kelly because he was not employed by us on such date. </FONT></P>
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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Base Salary </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Bonus </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Equity Compensation </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bryan&nbsp;L. Hansel</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Paul&nbsp;R. Geist</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robin&nbsp;J. Mackie</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Ben Kevin Neal</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,451,571</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,451,571</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Jacques&nbsp;D. Schira</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,451,571</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,451,571</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Messrs.&nbsp;Neal
and Schira's stock options vest and become exercisable immediately upon a change of control of us. The amount reported is equal to the
number of shares of common stock subject to the option multiplied by the difference between the fair value of our common stock as of December&nbsp;31, 2010 ($12.04 per share) and the exercise price
of the option ($0.73 per share). </FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> AGREEMENTS WITH EXECUTIVES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between September and November 2011, we entered into new employment agreements with each of our named executive officers, the terms of
which are summarized below. The agreements replaced in all respects our named executive officers' prior employment agreements or arrangements. Under each employment agreement, the executive is
eligible to be considered for an annual discretionary performance bonus of up to an amount determined by our President and Chief Executive Officer and/or our board of directors (or a board committee),
based on performance criteria determined by the board (or a board committee) each performance year. We agreed to pay or, as applicable, reimburse each executive for, 100% of the cost of various
insurance coverages maintained by the executive for him or herself and his or her family. We also agreed to pay for each executive's membership in various professional and social associations as may
be deemed appropriate by our President and Chief Executive Officer or our board of directors, as applicable. Each employment agreement subjects the executive to customary confidentiality and
assignment of inventions covenants, and prohibits the executive from competing with us, or soliciting for hire any of our employees for the purpose of competing with us, during the term of the
executive's employment with us and for a period of 12&nbsp;months thereafter. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
any termination of an executive's employment, the executive is entitled to receive all accrued but unpaid benefits, reimbursements and base salary owed to him or her as of the date
of his or her termination. Upon termination of the executive's employment agreement (i)&nbsp;by us upon his or her death or disability, (ii)&nbsp;by us without cause, (iii)&nbsp;by him or her
for good reason or (iv)&nbsp;by him or her following a change of control of us, the executive also is entitled to receive (a)&nbsp;100% of his or her then current base salary, (b)&nbsp;COBRA
coverage for the executive and his or her family for 12&nbsp;months following the date of his or her termination at our expense, except for Mr.&nbsp;Mackie, to whom COBRA coverage does not apply,
(c)&nbsp;the amount of any performance bonus that has been earned in a prior year but remains unpaid as of the date of termination and (d)&nbsp;a pro-rated portion of any performance
bonus he or she would have received for the fiscal year in which his or her employment is terminated.
All severance payments and benefits provided to the executive upon termination are conditioned on the executive executing and not revoking an applicable release of claims agreement with us. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>127</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
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<P style="font-family:times;"><FONT SIZE=2><B> Bryan&nbsp;L. Hansel  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into an employment agreement with Mr.&nbsp;Hansel, our President and Chief Executive Officer, on November&nbsp;2, 2011.
The employment agreement does not have a specific term. Under the agreement, Mr.&nbsp;Hansel is entitled to an annual base salary of $425,000. We agreed to provide Mr.&nbsp;Hansel with an
automobile allowance of $1,000 per month. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Paul&nbsp;R. Geist  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into an employment agreement with Mr.&nbsp;Geist, our Chief Financial Officer, on September&nbsp;14, 2011. The
employment agreement does not have a specific term. Under the agreement, Mr.&nbsp;Geist is entitled to an annual base salary of $265,000. Mr.&nbsp;Geist also is entitled under his employment
agreement to a guaranteed performance bonus payment in the amount of $100,000 if he remains employed by us through October&nbsp;1, 2011. We paid this bonus to Mr.&nbsp;Geist in October 2011.
Additionally, Mr.&nbsp;Geist is eligible to receive a cash bonus equal to 100% of his base salary, with 50% of such bonus becoming due and payable if a registration statement for our initial public
offering is filed with the SEC on or prior to October&nbsp;21, 2012 and the remaining 50% becoming due and payable if we complete our initial public offering on or prior to October&nbsp;21, 2012.
We agreed to provide Mr.&nbsp;Geist with an automobile allowance of $750 per month. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Kevin Kelly  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into an employment agreement with Mr.&nbsp;Kelly, our former Chief Financial Officer, on November&nbsp;1, 2009. The
employment agreement was terminated upon Mr.&nbsp;Kelly's resignation on August&nbsp;15, 2010. Under the agreement, Mr.&nbsp;Kelly was entitled to an annual base salary of $175,000 and was
eligible for an annual performance bonus of up to 100% of his base
salary. We agreed to pay 100% of the cost of various insurance coverages maintained by Mr.&nbsp;Kelly for himself and his family, to provide Mr.&nbsp;Kelly with an automobile allowance of $750 per
month and to pay for Mr.&nbsp;Kelly's membership in various professional and social associations as may be deemed appropriate by our President and Chief Executive Officer. Mr.&nbsp;Kelly did not
receive any severance benefits and forfeited his equity awards upon the termination of his employment. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Robin&nbsp;J. Mackie  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith Europe entered into an employment agreement with Mr.&nbsp;Mackie, our Chief Technology Officer and Senior Vice President, which
became effective on November&nbsp;8, 2011. Prior to such date, Mr.&nbsp;Mackie provided services to us pursuant to an oral agreement. Mr.&nbsp;Mackie's employment agreement does not have a
specific term. Under the agreement, Mr.&nbsp;Mackie is entitled to an annual base salary of $325,000 and we agreed to provide Mr.&nbsp;Mackie with an automobile allowance of &pound;1,000 per
month. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Ben Kevin Neal  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into an employment agreement with Mr.&nbsp;Neal, our Vice President of Human Resources and Administration, on
September&nbsp;14, 2011. The employment agreement does not have a specific term. Under the agreement, Mr.&nbsp;Neal is entitled to an annual base salary of $175,000. We agreed to provide
Mr.&nbsp;Neal with an automobile allowance of $750 per month. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Jacques&nbsp;D. Schira  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We entered into an employment agreement with Mr.&nbsp;Schira, our General Counsel, on September&nbsp;14, 2011. The employment
agreement does not have a specific term. Under the agreement, Mr.&nbsp;Schira is entitled to an annual base salary of $225,000. We agreed to provide Mr.&nbsp;Schira with an automobile allowance of
$750 per month. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>128</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> EQUITY COMPENSATION PLANS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 2009 Incentive Compensation Plan  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our 2009 Incentive Compensation Plan, or 2009 Plan, was adopted by our board of directors in December 2009 and approved by our
stockholders on December&nbsp;18, 2009. We have awarded only incentive and nonqualified stock options and restricted stock under the 2009 Plan. The 2009 Plan also provides for stock appreciation
rights, deferred stock awards, bonus stock and awards, dividend equivalents, performance awards and other stock-based awards to persons who provide services to us, including officers, directors,
employees and consultants of us or any subsidiary. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
2009 Plan is administered by our board of directors, or a committee it appoints, which has full and final authority with respect to the 2009 Plan and awards granted under the plan.
As administrator, our board of directors has the authority, subject to the terms of the 2009 Plan to establish, amend, and revoke rules and regulations it considers appropriate for the administration
and interpretation of the 2009 Plan. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
total of 1,119,400 shares of our common stock were made available under the 2009 Plan. In any fiscal year, no participant may be granted options or stock appreciation rights with
respect to more than 447,760 shares under the plan. The maximum dollar value payable to any participant with respect to performance units is $1,000,000 for any twelve month performance period and
$2,000,000 with respect to any performance period greater than twelve months. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
board of directors, or the committee appointed by the board, has discretion to determine the terms and conditions of each award; however, the exercise price of options granted under
the 2009 Plan must be at least the fair market value of our common stock, or if incentive stock options are granted to an employee who holds more than ten percent of the combined voting power of the
company, the exercise price must be at least 110% of the fair market value of our common stock. If a stock option or other stock award expires or otherwise terminates without having been exercised in
full, the unpurchased shares subject to such awards will become available for future grant or sale under the 2009 Plan. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event of a change in control, any unvested option granted under the 2009 Plan will vest immediately and any restrictions or forfeiture provisions will lapse and performance goals
and
conditions may be deemed as having been met. In the event of an initial public offering, stock options granted to certain of our executives will vest immediately pursuant to the terms of their
individual agreements. A change in control generally occurs upon the acquisition of more than 50% of the value of equity or the combined voting power of the company; any two years during which a
majority of our new directors are not approved by a majority of the incumbent board of directors; the occurrence of a reorganization, merger, statutory share exchange, consolidation or similar event
with respect to us, or sale of all or substantially all of our assets; or approval by our stockholders of a complete liquidation or dissolution of us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally,
awards or interests granted under the 2009 Plan may only be assigned or transferred by will or laws of descent or to a beneficiary upon the grantee's death, but awards other
than incentive stock options may be transferred if permitted by the terms of the award and by the board of directors. The board of directors may amend, alter, suspend, discontinue or terminate the
2009 Plan, subject to stockholder approval if required by applicable law or stock market requirements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of November&nbsp;4, 2011, there were options to purchase an aggregate of 1,114,688 shares of common stock outstanding under the 2009 Plan at a weighted average exercise price of
$9.66 per share. As of such date, no shares of common stock had been issued upon the exercise of options granted under the 2009 Plan. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>129</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only
option awards and restricted stock were granted under the 2009 Plan. An option award under the 2009 Plan grants a right to the participant to purchase shares at a specific price
during a specific time period, based on the fair market value of the shares at the grant date. Options may be granted as either incentive stock options or as nonqualified stock options. A restricted
stock award is a grant to receive our common stock subject to various restrictions, including restrictions on transferability and forfeiture provisions. The administrator will advise the purchaser of
the terms, conditions, and restrictions related to the grant. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following
the closing of this offering, no additional awards will be granted under the 2009 Plan, but the 2009 Plan will continue to govern the terms and conditions of the outstanding
awards previously granted thereunder. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> 2012 Incentive Plan  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our 2012 Incentive Plan, or 2012 Plan, which will become effective upon the closing of this offering, was adopted by our board of
directors on May&nbsp;9, 2011 and approved by our stockholders on November&nbsp;3, 2011. The 2012 Plan provides for the grant of incentive and nonqualified stock options, stock appreciation
rights, shares of restricted stock, restricted stock units and any other form of stock-based awards. The plan also permits cash incentive awards. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
employees, officers, directors, consultants and advisors, and the employees, officers, directors, consultants and advisors of any of our present or future parent or subsidiaries, are
eligible to receive awards under our 2012 Plan; however, incentive stock options may only be granted to employees of us, our parent or any of our subsidiaries. Upon effectiveness of the plan,
3,000,000 shares of our common stock will be reserved for issuance under the 2012 Plan, of which 300,000 may be issued as incentive stock options. The maximum amount that may be earned as a cash
performance-based award for a single calendar year by any participant is $2,000,000, and the maximum amount that may be earned as a cash award for a performance period of greater than a single
calendar year by any participant is $6,000,000. The maximum number of shares that may be earned in any calendar year as a performance-based award is 1,000,000. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Awards
granted to participants under the 2012 Plan will vest only if certain conditions set forth in their awards are met. Vesting criteria can include the passage of time or the
attainment of performance objectives, or both. Participants in the plan do not need to be treated uniformly. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
2012 Plan will be administered by the committee appointed by our board of directors, which will have authority to grant awards and determine the recipients, exercise price,
conditions and other terms of such awards, provided that the exercise price for stock options must be at least the fair market value of our common stock as of the date the award is granted or, in the
case of incentive stock options granted to a holder of ten percent or more of voting power, at least 110% of the fair market value of our common stock as of the date the award is granted. The
committee will also have full discretionary authority to interpret the terms of the 2012 Plan and any awards made under the plan and to grant substitute awards under certain circumstances.
Performance-based awards must be based on one or more performance criteria set forth in the 2012 Plan, with the specific criteria to apply to each award to be at the discretion of the compensation
committee. Unless the committee appointed by the board of directors provides otherwise, holders of restricted stock will be able to receive dividends, if any, paid to owners of such shares. Any
dividend or distribution, other than a cash distribution, will be subject to those restrictions to which the award is subject. If permitted by applicable law, the compensation committee may delegate
its authority to a subcommittee or to our management. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
a change in capitalization, such as a stock spilt, stock dividend or reclassification of shares, we will adjust the number of securities available under the 2012 Plan and the terms
of the outstanding awards, such as the number of securities and exercise price, as determined by the compensation committee. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>130</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
a change in control of the company, the compensation committee has discretion to provide that one or more of the following occur with regard to all or any outstanding awards under
the 2012 Plan: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>awards will be assumed or that substantially equivalent awards will be substituted by the acquiring or succeeding entity, </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the participants' unexercised awards will terminate immediately prior to the change in control unless exercised within a
specified time period provided by written notice,  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>outstanding awards will become exercisable, realizable or deliverable (or restrictions will lapse) before or upon the
change in control,  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a cash payment be made to participants, if a cash payment would be made for shares surrendered in the change of control,
or  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>in connection with a liquidation or dissolution, awards will convert into the right to receive the liquidation proceeds. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
change in control generally will occur upon the acquisition of 40% or more of either our outstanding shares or combined voting power; if the majority of new directors on our board are
not approved by a majority of the incumbent board; if a reorganization, merger or consolidation of us or other similar disposition of our assets occurs; or approval by our stockholders of a complete
dissolution or liquidation of us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Awards
under the 2012 Plan are only transferable by will, the laws of descent or pursuant to a qualified domestic relations order. No award may be granted under the 2012 Plan on or after
the tenth anniversary of the date on which our initial public offering of common stock closes. The compensation committee may amend, suspend or terminate the 2012 Plan at any time, except that
stockholder approval will be required to comply with applicable law or stock market requirements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> LIMITATION OF LIABILITY AND INDEMNIFICATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our certificate of incorporation, which also will become effective upon the closing of this offering, limits the liability of our
directors for monetary damages for breach of fiduciary duty to the maximum extent permitted by the Delaware General Corporation Law and provides that no director will have personal liability to us or
to our stockholders for monetary damages for breach of fiduciary duty as a director. However, these provisions do not eliminate or limit the liability of any of our
directors: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>for any breach of the director's duty of loyalty to us or our stockholders;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>for voting or assenting to unlawful payments of dividends, stock repurchases or other distributions; or </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>for any transaction from which the director derived an improper personal benefit. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
amendment to or repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to such
amendment or repeal. If the Delaware General Corporation Law is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our
directors will be further limited to the maximum extent permitted by the Delaware General Corporation Law. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
certificate of incorporation and by-laws, which will become effective upon the closing of this offering, provide that, subject to certain exceptions, we are required to
indemnify our directors, officers, employees and agents, in each case to the fullest extent permitted by Delaware law. Our by-laws also </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>131</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>provide
that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any
officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the
provisions of Delaware law. We have entered and expect to continue to enter into agreements to indemnify our directors, officers and other employees as determined by our board of directors. With
specified exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys' fees, judgments, fines and settlement amounts incurred by any of these
individuals in any action or proceeding. We believe that these by-law provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and
officers. We also maintain directors' and officers' liability insurance. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
of our non-employee directors may, through their relationships with their employers, be insured and/or indemnified against certain liabilities in their capacity as
members of our board of directors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
limitation of liability and indemnification provisions in our certificate of incorporation and by-laws may discourage stockholders from bringing a lawsuit against our
directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might
benefit us and other stockholders. Further, a stockholder's investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as
required by these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought, and we
are not aware of any threatened litigation that may result in claims for indemnification. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>132</FONT></P>

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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
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<BR></FONT><FONT SIZE=2><B>  RELATIONSHIPS AND RELATED PERSON TRANSACTIONS    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We describe below transactions, since our inception, to which we were a party or will be a party, in which: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the amounts involved exceeded or will exceed $120,000; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a director, executive officer, holder of more than 5% of our voting securities or any member of their immediate family had
or will have a direct or indirect material interest. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> TANFIELD TRANSACTIONS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since our formation in January 2009, we have entered into various transactions with Tanfield or its affiliates, as described below. At
the time of each such transaction, (i)&nbsp;Tanfield beneficially owned more than 5% of our common stock, (ii)&nbsp;Roy Stanley, who was Chairman of our board of directors from December&nbsp;18,
2009 through November&nbsp;4, 2011, beneficially owned more than 10% of Tanfield's outstanding share capital and was a director of Tanfield, and (iii)&nbsp;Darren Kell, who has been a member of
our board of directors since our formation, was the chief executive officer and a director of Tanfield. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Smith UK acquisition  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We acquired our Smith UK business from Tanfield and certain of its subsidiaries, effective January&nbsp;1, 2011, for a total purchase
price of $15.0&nbsp;million. We paid Tanfield $750,000 of the purchase price at closing and the remainder is payable in 19 equal monthly installments. The unpaid portion of the purchase price bears
interest at a rate of 4.0% in excess of the base rate established by Barclays Bank&nbsp;PLC from time to time. As of September&nbsp;30, 2011, we owed Tanfield $8.1&nbsp;million, which included
the $8.0&nbsp;million balance of the purchase price and accrued interest, and $0.1&nbsp;million owed to Tanfield under a transitional services agreement we entered into in connection with the
acquisition. In connection with the closing of our 2011 convertible notes financing, we paid Tanfield $5.6&nbsp;million of this amount and Tanfield converted $2.0&nbsp;million of this amount into
a convertible note of like principal amount and a 2011 warrant to purchase 48,148 shares of our common stock. We are obligated to pay the $0.5&nbsp;million balance, plus accrued interest, in full to
Tanfield upon the completion of this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Tanfield production facility license agreement  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through Smith Europe, we license our 80,000 square foot production facility in Washington, Tyne and Wear, England from Tanfield
pursuant to a license to occupy dated January&nbsp;1, 2011. Tanfield leases the entire 250,000 square foot facility from a third party. The license to occupy does not create a landlord-tenant
relationship between Smith Europe and Tanfield. Smith Europe pays a fee of &pound;23,500 per month to occupy space at the facility and we guarantee Smith Europe's obligations under the
agreement. The license to occupy expires on December&nbsp;31, 2013 unless terminated earlier in accordance with its terms. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Tanfield warrant  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;5, 2009, we issued a five-year warrant to Tanfield, which was amended on December&nbsp;18, 2009. The
warrant, as amended, provided Tanfield the right to purchase a number of shares of our common stock equal to 49% of (i)&nbsp;the number of shares of common stock issued and vested pursuant to our
2009 Incentive Compensation Plan, (ii)&nbsp;the number of shares of common stock issued to the investors in our Series&nbsp;A financing for amounts invested between $7.5&nbsp;million and
$10.0&nbsp;million, (iii)&nbsp;the number of shares of common stock issued to the investors in our Series&nbsp;A financing for amounts invested between $10.0&nbsp;million and
$15.0&nbsp;million, provided that such amounts were invested on or prior to August&nbsp;7, 2009, and (iv)&nbsp;the number of shares of common stock issued to Roy Stanley pursuant to his services
agreement with us. The warrant had an exercise price of $0.01 per </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>share
and was exercisable on a cashless basis. Tanfield exercised this warrant on March&nbsp;12, 2010 for 640,468 shares of our common stock. We and Tanfield terminated this warrant effective
November&nbsp;4, 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Tanfield license and services agreements  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;27, 2009, we entered into an agreement with Tanfield Engineering Systems Limited, or Tanfield Engineering, a wholly
owned subsidiary of Tanfield, under which Tanfield Engineering agreed to provide us with certain services and a license to certain intellectual property necessary for our business operations. On
August&nbsp;5, 2009, we entered into a license agreement with Tanfield Engineering under which Tanfield Engineering licensed to us the exclusive right to develop, test, manufacture, market,
distribute, sell and service electric vehicles in North America under Tanfield's electric vehicle intellectual property (other than trade and service marks). Under the license agreement, we were
required to pay Tanfield an upfront payment of &pound;1.0&nbsp;million, which was payable in installments, and a royalty equal to 2% of our net sales of commercial electric vehicles until the
upfront payment was paid in full and a royalty of 1% of our net sales of commercial electric vehicles thereafter. We paid Tanfield an aggregate of &pound;1.0&nbsp;million in upfront payments
and royalties under the license agreement. Additionally, we issued Tanfield 4,409,549 shares of our common stock, which represented 49% of our then-outstanding common stock, as partial
consideration for Tanfield Engineering entering into the license agreement. Tanfield Engineering also performed certain services in support of our business and we paid Tanfield Engineering
$0.4&nbsp;million for such services. The license and services agreements were terminated, and Smith Europe acquired the licensed intellectual property rights, in connection with the acquisition of
the Smith UK business from Tanfield. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Tanfield letter agreement  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November 2011, we entered into a letter agreement with Tanfield in which Tanfield agreed to not acquire or enter into any derivative
contract that provides Tanfield with the economic benefit of acquiring any shares of our common stock or to make any public announcement of its intention to take any such actions. The letter agreement
also restricts Tanfield's ability to transfer its rights under our amended and restated investor rights agreement in connection with Tanfield's transfer of more than 10% of our outstanding common
stock to a third party unless the third party agrees to abide by the standstill provisions described in the preceding sentence. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> EQUITY AND DEBT ISSUANCES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Series&nbsp;C preferred stock issuance  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between November&nbsp;3, 2011 and November&nbsp;8, 2011, we issued 2,431,170 shares of our Series&nbsp;C preferred stock in
connection with the conversion of all of our outstanding 2011 convertible notes. We did not receive any additional cash proceeds from the conversion of our 2011 convertible notes into Series&nbsp;C
preferred stock. The following table sets forth for each of our 5% stockholders that converted a convertible note into shares of Series&nbsp;C preferred stock the number of shares received upon
conversion. </FONT></P>
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<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="86pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:21pt;"><FONT SIZE=1><B>Name

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of Shares </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Tanfield Group&nbsp;Plc</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>160,992</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Continental Casualty Company</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,215,636</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Potomac Energy Fund&nbsp;LP</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>226,918</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,603,546</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
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 <P style="font-family:times;"><FONT SIZE=2><B> 2011 convertible notes financing  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between October&nbsp;7, 2011 and October&nbsp;31, 2011, we issued and sold $30.0&nbsp;million in aggregate principal amount of
2011 convertible notes and seven-year warrants to purchase 726,960 shares of our common stock for aggregate proceeds of $30.0&nbsp;million. The aggregate proceeds consisted of cash
proceeds of $25.2&nbsp;million, cancellation of the $2.8&nbsp;million of indebtedness under the senior note and the conversion of approximately $2.0&nbsp;million of the outstanding balance of
the purchase price we owe to Tanfield in connection with the acquisition of our Smith UK business. Wynston Hill Capital,&nbsp;LLC, or Wynston Hill, which beneficially owned more than 5% of our
outstanding common stock at the time of the transaction, served as our placement agent, and we paid Wynston Hill a fee of $485,189 for such services. The following table sets forth for each of our 5%
stockholders that participated in the offering, the principal amount of the convertible note and the number of shares covered by the warrant received, and the purchase price paid, by such stockholder. </FONT></P>
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<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:21pt;"><FONT SIZE=1><B>Name

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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Principal Amount of<BR>
Convertible Note </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Warrant Shares </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Purchase Price </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Tanfield Group&nbsp;Plc</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,988,388</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>48,148</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,988,388</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Continental Casualty Company</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15,000,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>363,489</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15,000,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Potomac Energy Fund&nbsp;LP</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,800,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>67,851</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,800,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
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<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>19,788,388</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>479,488</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>19,788,388</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
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 <P style="font-family:times;"><FONT SIZE=2><B> Senior note financing  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;14, 2011, we issued a $2.8&nbsp;million senior note to Potomac Energy Fund&nbsp;LP, which beneficially owned
more than 5% of our outstanding capital stock at the time of
the transaction. The senior note accrued interest at 8.00% per annum and had a maturity date of December&nbsp;31, 2011. We exchanged this note in connection with our Series&nbsp;C financing
discussed above. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Series&nbsp;B preferred stock  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February and March 2011, (i)&nbsp;we sold an aggregate of 3,239,202.6576 shares of Series&nbsp;B preferred stock at a purchase
price of $12.04 per share for aggregate cash proceeds of approximately $39.0&nbsp;million and (ii)&nbsp;we issued an aggregate of 1,569,804.48 shares of Series&nbsp;B preferred stock to holders
of the bridge notes and warrants described below upon the conversion of all but approximately $171,167 (which we repaid in cash) of the bridge notes at the conversion price of $12.04 per share and the
cashless exercise of the outstanding warrants. Wynston Hill, which beneficially owned more than 5% of our outstanding capital stock at the time of the transaction, served as our placement agent, and
we paid Wynston Hill a fee of $1,200,000 for such services. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Bridge note financing  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between March and October 2010, we issued and sold $14.2&nbsp;million of units, each consisting of a $500,000 principal amount senior
unsecured convertible promissory bridge note, or a bridge note, and a two-year warrant to purchase shares of the class of our equity securities into which the bridge notes were
convertible. The notes accrued interest as a rate of 12% per annum and matured on the earlier of one year from the date of issuance and the consummation of an equity offering in which we receive gross
proceeds of at least $20.0&nbsp;million. In March 2011, all but approximately $171,167 (which we repaid in cash) of the full principal amount of and accrued and unpaid interest on the bridge notes
was converted into shares of series&nbsp;B preferred stock and each of the warrants was exercised in a cashless transaction for the issuance of shares of Series&nbsp;B preferred stock, as
described above under "&#151;Series&nbsp;B preferred stock." Wynston Hill, which beneficially owned more than 5% of our outstanding capital stock at the time of the transaction, acted as our
placement agent in connection with the issuance of </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>the
units, and we paid Wynston Hill a fee of $707,500 for such services. Bruce Shalett, who served on our board of directors from our inception until his resignation in March 2010, was an executive of
Wynston Hill at the time of such transactions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Series&nbsp;A debentures and common stock  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between March 2009 and January 2010, we issued and sold $11.1&nbsp;million of units, each consisting of a Series&nbsp;A debenture
with a principal amount of $100,000 and 6,666 shares of our common stock. Wynston Hill, which beneficially owned more than 5% of our outstanding capital stock at the time of the transaction, acted as
our placement agent in connection with the issuance, and we paid Wynston Hill a fee of $555,000 for such services. Bruce Shalett, who served on our board of directors from our inception until his
resignation in March 2010, was an executive of Wynston Hill at the time of such transactions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Common stock issuances  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;16, 2009, we issued 797,063 shares of our common stock to Wynston Hill as consideration for financial advice and
consulting services provided to us in connection with our organization and development of our business plan. On that same date, we issued 3,128,257 and 664,220 shares of our common stock to Bryan
Hansel, our Chief Executive Officer, and Robin Mackie, our Chief Technology Officer and Senior Vice President, respectively, in each case as compensation for services provided to us. Of the shares
issued to Mr.&nbsp;Hansel, 1,998,800 were subject to forfeiture if Mr.&nbsp;Hansel was not appointed chairman of our board of directors on or before December&nbsp;31, 2009. Mr.&nbsp;Hansel
forfeited these 1,998,800 shares, which we then issued to Mr.&nbsp;Stanley on December&nbsp;18, 2009 upon Mr.&nbsp;Stanley's appointment as chairman of our board of directors. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> OTHER TRANSACTIONS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Investor rights agreement  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into an amended and restated investor rights agreement, dated as of November&nbsp;3, 2011, with the holders of our
preferred stock and certain holders of our common stock, including some of our directors, executive officers and holders of more than five percent of our voting securities and their affiliates. This
agreement provides for certain rights relating to the registration of such stockholders' shares of common stock, including, as applicable, those issued
upon conversion of their Series&nbsp;B or Series&nbsp;C preferred stock. See "Description of Capital Stock&#151;Registration Rights" for additional information. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Right of first refusal and co-sale agreement  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into an amended and restated right of first refusal and co-sale agreement, dated as of November&nbsp;3,
2011, with the holders of our preferred stock and certain holders of our common stock, including some of our directors, executive officers and holders of more than five percent of our voting
securities and their affiliates, pursuant to which we and the holders of our preferred stock have a right of purchase and co-sale in respect of sales of securities by our common
stockholders party to the agreement. These purchase and co-sale rights do not apply to shares sold pursuant to this offering, and this agreement will terminate on the day prior to the
closing date of this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Voting and drag-along agreement  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into an amended and restated voting and drag-along agreement, dated as of November&nbsp;3, 2011, with the
holders of our preferred stock and certain holders of our common stock, including some of our directors, executive officers and holders of more than five percent of our voting securities and their
affiliates, pursuant to which, among other things, each of the parties thereto has </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>agreed
to vote all of the shares of our capital stock they hold in the manner described therein with respect to the size and composition of our board of directors and certain liquidation events of us,
subject to certain specified exceptions. Additionally, the parties to this agreement have agreed to sell the shares of our capital stock they hold in connection with certain sales of more than 50% of
our outstanding voting stock and to provide the other parties to the agreement the right to sell shares of our capital stock held by such other parties in the event of a sale by any parties to the
agreement of at least 50% of our outstanding voting stock, in each case, subject to certain specified exceptions. The agreement also provides Tanfield with certain approval rights over certain deemed
liquidation events and contains non-competition covenants applicable to each of the stockholder parties to the agreement. This agreement will terminate upon the closing of this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Indemnification agreements  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into indemnification agreements with each of our directors and executive officers. The indemnification agreements and
our certificate of incorporation and by-laws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law. See "Executive
Compensation&#151;Limitation on Liability and Indemnification." </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Tooling Edge,&nbsp;LLC service agreement  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;14, 2009, we entered into a service agreement with Tooling Edge,&nbsp;LLC and Jeff Hansel, a family member of our
Chief Executive Officer, under which Tooling Edge,&nbsp;LLC and Mr.&nbsp;Hansel agreed to provide us with certain consulting services as may be requested by us from time to time, which have
primarily included developing and improving our supply sourcing. From December 2009 until November 2010, we paid Tooling Edge,&nbsp;LLC and Mr.&nbsp;Hansel, collectively, $4,000 per month for
these services, in addition to reimbursement for reasonable expenses incurred in providing the services. In connection with an increase in the services provided under the services agreement, since
November 2010 we have paid them a monthly services fee of $15,000, plus reasonable expense reimbursements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Roy Stanley services agreement  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On December&nbsp;18, 2009, we entered into a services agreement with Roy Stanley, the former Chairman of our board of directors and
the founder and a director of Tanfield. In consideration of his services as Chairman, we issued to Mr.&nbsp;Stanley 1,998,800 shares of our common stock. We and Mr.&nbsp;Stanley executed an
addendum to this agreement on January&nbsp;15, 2010, under which Mr.&nbsp;Stanley agreed to provide us with certain additional services focusing on identifying new technology and product portfolio
opportunities. We pay Mr.&nbsp;Stanley &pound;4,000 per month for these additional services. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RELATED PERSON TRANSACTIONS POLICY  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has adopted a Related Person Transactions Policy, which governs the review, approval and ratification of
transactions involving us and related persons where the amount involved exceeds $120,000. Related persons include our executive officers, directors, director nominees, 5% stockholders and immediate
family members of such persons, and entities in which one of these persons has a direct or indirect material interest. Under this policy, prior to entering into any related-person transaction, our
general counsel or corporate secretary is to be notified of the facts and circumstances of the proposed transaction, including: (i)&nbsp;the related person's relationship to us and interest in the
transaction; (ii)&nbsp;the material facts of the proposed transaction, including the proposed aggregate value of such transaction or, in the case of indebtedness, the amount of principal that would
be involved; (iii)&nbsp;the benefits to us of the proposed transaction; (iv)&nbsp;if applicable, the availability of other sources of comparable products or services; and (v)&nbsp;an assessment
of whether the proposed </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>transaction
is on terms that are comparable to the terms available to an unrelated third party or to employees generally. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
general counsel or corporate secretary, in consultation with our legal counsel as appropriate, then assesses whether the proposed transaction is a related-person transaction for
purposes of the policy and SEC rules. If the general counsel or corporate secretary determines that the proposed transaction is a related-person transaction, the proposed transaction is then submitted
to the audit committee of our board of directors for its consideration. The audit committee considers all of the relevant facts and circumstances available, including (if applicable) but not limited
to: (i)&nbsp;the benefits to us of the transaction; (ii)&nbsp;the impact of the transaction on a director's independence, in the event such person is a director; (iii)&nbsp;the availability of
other sources for comparable products or services; (iv)&nbsp;the terms of the transaction; and (v)&nbsp;the terms available to unrelated third parties or to employees generally. No member of the
audit committee can participate in any review, consideration or approval of any related-person transaction if such member or any of his or her immediate family members is the related person. The audit
committee approves only those proposed transactions that are in, or are not inconsistent with, our best interests and the best interests of our stockholders, as determined by the audit committee in
good faith. In the event that we become aware of a related-person transaction that has not been previously approved or ratified, a similar process will be undertaken in order to determine if the
existing transaction should continue or be terminated and/or if any disciplinary action is appropriate. Our general counsel or corporate secretary also may develop, implement and maintain from time to
time certain administrative procedures to ensure the effectiveness of this policy. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="eg78101_principal_and_selling_stockholders"> </A>
<A NAME="toc_eg78101_1"> </A>
<BR></FONT><FONT SIZE=2><B>  PRINCIPAL AND SELLING STOCKHOLDERS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information with respect to the beneficial ownership of our common stock, as of November&nbsp;8, 2011
by: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our voting securities; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>each of our directors;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>each of our named executive officers;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>all of our directors and executive officers as a group; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>each selling stockholder. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
number of shares beneficially owned by each stockholder is determined under SEC rules. Under these rules, beneficial ownership includes any shares as to which the individual or
entity has sole or shared voting power or investment power. In addition, these rules provide that an individual or entity beneficially owns any shares issuable upon the exercise of stock options or
warrants held by such person or entity that were exercisable on November&nbsp;8, 2011 or within 60&nbsp;days after November&nbsp;8, 2011; and any reference in the footnotes to this table to
stock options refers only to such options or warrants. "Shares Beneficially Owned Prior to Offering" includes, in addition to the 10,507,929 shares of common stock outstanding as of November&nbsp;8,
2011, 7,240,149 shares of common stock issuable upon the conversion immediately prior to the closing of this offering of all shares of Series&nbsp;B preferred stock and Series&nbsp;C preferred
stock, each of which has a one-to-one conversion ratio. In computing the percentage ownership of each individual and entity, the number of outstanding shares of common stock
includes, in addition to the 10,507,929 shares outstanding as of November&nbsp;8, 2011 and the shares of common stock issuable upon the conversion of all of our Series&nbsp;B preferred stock and
Series&nbsp;C preferred stock, any shares subject to options or warrants held by that individual or entity that were exercisable on or within 60&nbsp;days after November&nbsp;8, 2011. These
shares are not considered outstanding, however, for the purpose of computing the percentage ownership of any other stockholder. Each of the stockholders listed has sole voting and investment power
with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable. Except as otherwise set forth below, the address of the
beneficial owner is c/o Smith Electric Vehicles Corp., 12200 N.W. Ambassador Drive, Suite&nbsp;326, Kansas City, Missouri 64163. </FONT></P>
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<TD WIDTH="53pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="63pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="40pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares Beneficially<BR>
Owned Prior to Offering </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares Beneficially<BR>
Owned After Offering </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares Being<BR>
Offered </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:139pt;"><FONT SIZE=1><B>Name and Address of Beneficial Owner

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Percentage </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Percentage </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>5% Stockholders</B></FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Tanfield Group&nbsp;Plc<BR>
Vigo Centre, Birtley Road<BR>
Washington, Tyne and Wear NE38&nbsp;9DA<BR>
United Kingdom(1)</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>5,259,192</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>29.55</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Continental Casualty Company<BR>
333 South Wabash Avenue<BR>
23 South<BR>
Chicago, Illinois 60604(2)</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>2,824,973</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>15.60</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Roy Stanley<BR>
16 Graham Park Road<BR>
Newcastle upon Tyne NE3&nbsp;4BH<BR>
United Kingdom(3)</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>1,998,800</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>11.26</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Potomac Energy Fund,&nbsp;LP<BR>
1105&nbsp;Market Street, Suite&nbsp;300<BR>
Wilmington, DE 19801(4)</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>1,283,971</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>7.21</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>139</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>
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<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="53pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="63pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="40pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares Beneficially<BR>
Owned Prior to Offering </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares Beneficially<BR>
Owned After Offering </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares Being<BR>
Offered </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:139pt;"><FONT SIZE=1><B>Name and Address of Beneficial Owner

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Percentage </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Percentage </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Directors and Named Executive Officers</B></FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bryan&nbsp;L. Hansel(5)</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>1,129,457</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>6.36</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Paul&nbsp;R. Geist</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>101,422</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Kevin Kelly(6)</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Robin&nbsp;J. Mackie</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>664,220</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>3.74</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Ben Kevin Neal(7)</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>128,344</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Jacques&nbsp;D. Schira(8)</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>128,344</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>All of our directors and executive officers as a group (12&nbsp;persons)</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Other Selling Stockholders</B></FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Douglas Fleming</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>25,355</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Represents
beneficial ownership of less than 1.0% of our common stock.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Consists
of 5,050,017 shares of common stock held of record by Tanfield Group&nbsp;Plc, 160,992 shares of common stock issuable upon the conversion of
shares of Series&nbsp;C preferred stock, and 48,183 shares subject to a currently exercisable warrant. Tanfield may sell a portion of its shares in this offering.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Consists
of 1,245,848 and 1,215,636 shares of common stock issuable upon the conversion of shares of Series&nbsp;B preferred stock and Series&nbsp;C
preferred stock, respectively, and 363,489 shares subject to a currently exercisable warrant. Continental Casualty Company is a wholly-owned subsidiary of The Continental Corporation, which is a
wholly-owned subsidiary of CNA Financial Corporation. Loews Corporation owns 90% of the outstanding common shares of CNA Financial Corporation. As such, each of The Continental Corporation, CNA
Financial Corporation and Loews Corporation may be deemed to have voting and/or investment power over the 2,461,484 shares of common stock issuable upon the conversion of shares of Series&nbsp;B
preferred stock and Series&nbsp;C preferred stock and the exercise of a warrant held of record by Continental Casualty Company. Each of The Continental Corporation, CNA Financial Corporation and
Loews Corporation disclaims beneficial ownership with respect to such shares.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Consists
of 1,998,800 shares of common stock held of record by Storm Finance Group Incorporated, 34 North Quay, Douglas, Isle of Man, IM1&nbsp;4LB.
Mr.&nbsp;Stanley owns 100% of the equity interests in Storm Finance Group Incorporated.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Consists
of 989,202 and 226,918 shares of common stock issuable upon the conversion of shares of Series&nbsp;B preferred stock and Series&nbsp;C
preferred stock, respectively, and 67,851 shares subject to a currently exercisable warrant.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Consists
of 829,457 shares of common stock held of record by Mr.&nbsp;Hansel and 300,000 shares of common stock held of record by Hansel (1997) Family
Trust.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Mr.&nbsp;Kelly
was our Chief Financial Officer until August&nbsp;15, 2010.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(7)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Consists
of 128,344 shares of common stock issuable upon the exercise of currently exercisable stock options.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(8)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Consists
of 128,344 shares of common stock issuable upon the exercise of currently exercisable stock options. </FONT></DD></DL>
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>140</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=147,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=407343,FOLIO='140',FILE='DISK126:[11ZDO1.11ZDO78101]EG78101A.;17',USER='JMCGUAN',CD=';9-NOV-2011;19:49' -->
<A NAME="page_eg78101_1_141"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="eg78101_shares_eligible_for_future_sale"> </A>
<A NAME="toc_eg78101_2"> </A>
<BR></FONT><FONT SIZE=2><B>  SHARES ELIGIBLE FOR FUTURE SALE    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to this offering, there has been no public market for shares of our common stock. Future sales of substantial amounts of shares
of our common stock, including shares issued upon the exercise of outstanding stock options, in the public market after this offering, or the possibility of these sales occurring, could adversely
affect the prevailing market price for our common stock from time to time or impair our ability to raise equity capital in the future. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the closing of this offering, a total of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock will be outstanding, assuming the
conversion of all of our outstanding Series&nbsp;A debentures at
an assumed conversion price of $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, which is 80% of the mid-point of the price range listed on the cover page of this prospectus. Of these shares,
all&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of common stock sold in this offering by us and the selling stockholders, plus any shares sold upon exercise of the underwriters' option to purchase additional shares, will be freely tradable in the
public market without restriction or further registration under the Securities Act, unless these shares are held by "affiliates," as that term is defined in Rule&nbsp;144 under the Securities Act. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
remaining shares of common stock will be "restricted securities," as that term is defined in Rule&nbsp;144 under the Securities Act. These restricted securities are eligible for
public sale only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rules&nbsp;144 or 701 under the Securities Act, which are summarized
below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject
to the lock-up agreements described below and the provisions of Rules&nbsp;144 and 701 under the Securities Act, these restricted securities will be available for
sale in the public market as follows: </FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH NOWRAP  ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:17pt;"><FONT SIZE=1><B>Date

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of<BR>
Shares </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>On the date of this prospectus</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Between 90 and 180&nbsp;days (subject to extension) after the date of this prospectus</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Between 180 and 365&nbsp;days (subject to extension) after the date of this prospectus</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>At various times beginning more than 365&nbsp;days (subject to extension) after the date of this prospectus</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally,
the 1,652,688 shares of our common stock that were subject to stock options outstanding as of November&nbsp;8, 2011 will be eligible for sale 180&nbsp;days after the
effective date of this offering, subject to extension as described in the section entitled "Underwriting" in this prospectus. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RULE 144  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, under Rule&nbsp;144 as currently in effect, once we have been subject to public company reporting requirements for at
least 90&nbsp;days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during 90&nbsp;days preceding a sale and who has beneficially owned
the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell such shares without complying with the manner of
sale, volume limitation or notice provisions of Rule&nbsp;144, subject to compliance with the public information requirements of Rule&nbsp;144. If such a person has beneficially owned the shares
proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then such person is entitled to sell such shares without complying with any of the
requirements of Rule&nbsp;144. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
general, under Rule&nbsp;144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon expiration of the
lock-up agreements described above, within </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>141</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>any
three-month period beginning 90&nbsp;days after the date of this prospectus, a number of shares that does not exceed the greater of: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>1% of the number of shares of common stock then outstanding, which will equal
approximately&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
immediately after this offering; or  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on
Form&nbsp;144 with respect to such sale. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Sales
under Rule&nbsp;144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to
the availability of current public information about us. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RULE 701  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rule&nbsp;701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or
contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90&nbsp;days to sell these shares in reliance upon Rule&nbsp;144, but without being
required to comply with the public information, holding period, volume limitation, or notice provisions of Rule&nbsp;144. Rule&nbsp;701 also permits affiliates of our company to sell their
Rule&nbsp;701 shares under Rule&nbsp;144 without complying with the holding period requirements of Rule&nbsp;144. All holders of Rule&nbsp;701 shares, however, are required to wait until
90&nbsp;days after the date of this prospectus before selling such shares pursuant to Rule&nbsp;701. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of November&nbsp;8, 2011, options to purchase 1,652,688 shares of our common stock were outstanding. Of those options, 256,688 were vested as of that date. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> LOCK-UP AGREEMENTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We, our executive officers and directors, and the holders of substantially all of our outstanding shares of common and preferred stock
and the holders of substantially all of our currently outstanding options, warrants and convertible debentures have entered into lock-up agreements with the underwriters. Under these
agreements, subject to certain exceptions, we and each of these persons may not, without the prior written approval of UBS Securities&nbsp;LLC and Merrill Lynch, Pierce, Fenner&nbsp;&amp; Smith
Incorporated, offer, sell, contract to sell, pledge, or otherwise dispose of, directly or indirectly, or hedge our common stock or securities convertible into or exchangeable or exercisable for our
common stock, except in the circumstances described below. These restrictions will be in effect for a period of 180&nbsp;days (or 365&nbsp;days in the case of Tanfield) after the date of this
prospectus, which period is subject to extension in the circumstances described in the section entitled "Underwriting" in this prospectus. At any time, UBS Securities&nbsp;LLC and Merrill Lynch,
Pierce, Fenner&nbsp;&amp; Smith Incorporated may, in their sole discretion, release some or all the securities from these lock-up agreements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
the above, if (i) during the period beginning on the date that is 15 calendar days plus three business days before the last day of the 180-day (or 365-day, in the case of
Tanfield) period described in the paragraph above, or the initial lock-up period, and ends on the last day of the initial lock-up period, we issue an earnings release or material news or a material
event relating to us occurs; or (ii) prior to the expiration of the initial lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the
initial lock-up period, then the restrictions imposed by these lock-up agreements will continue to apply until the expiration of the date that is 15 calendar days plus three business days after the
date on which the issuance of the earnings release or the material news or material event occurs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
restrictions set forth above shall not apply to our issuance of shares of our common stock described below: </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>142</FONT></P>

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<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the registration of the offer and sale of the shares of our common stock described in this prospectus; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the issuance by us of shares of common stock upon the exercise or conversion of options, warrants, convertible preferred
stock or convertible debentures disclosed as outstanding in this prospectus; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the issuance to employees, contractors or directors of restricted stock grants or stock options not exercisable during the
lock-up period pursuant to equity incentive plans described in this prospectus. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
restrictions set forth above shall not apply to the following types of transfers of shares of our common stock, or securities convertible into or exchangeable or exercisable for our
common stock, by any of our directors, executive officers or the holders of our shares or convertible securities in the following circumstances:  </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the sale of our common stock by the selling stockholders in this offering;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a bona fide gift; provided that the recipient thereof executes a lock-up agreement for the remainder of the lock-up
period;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a disposition to any trust for the direct or indirect benefit of the holder and/or the holder's immediate family;
provided, that (i) such disposition does not involve a disposition for value and (ii) such trust executes a lock-up agreement for the remainder of the lock-up period; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a transaction relating to any of our securities acquired in open market transactions after the completion of this
offering, provided that no filing under Section 16(a) of the Exchange Act is required or voluntarily made in connection with such transactions. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> REGISTRATION RIGHTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon completion of this offering, stockholders owning an aggregate
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of common stock or their transferees will
be entitled to various rights with respect to the registration of these shares under the Securities Act. Registration of these shares under the Securities Act would result in these shares becoming
fully tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. See "Description of Capital
Stock&#151;Registration Rights" for additional information. Shares covered by a registration statement will be eligible for sales in the public market upon the expiration or release from the
terms of the lock-up agreement. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> REGISTRATION STATEMENTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to file&nbsp;a registration statement on Form&nbsp;S-8 under the Securities Act following this offering to
register all of the shares of common stock issued or reserved for issuance under our equity compensation plans and agreements. We expect to file this registration statement as soon as practicable
after this offering. Shares covered by this registration statement will be eligible for sale in the public market, upon the expiration or release from the terms of the lock-up agreements,
and subject to vesting of such shares. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>143</FONT></P>

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<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
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<A NAME="toc_ei78101_1"> </A>
<BR></FONT><FONT SIZE=2><B>  DESCRIPTION OF CAPITAL STOCK    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> GENERAL  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of our capital stock, certain provisions of our certificate of incorporation and by-laws, as
they will be in effect upon the closing of this offering, an investor rights agreement we have entered into with certain of our stockholders, a rights plan we entered into
with&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, or the
rights plan, and certain provisions of the Delaware General Corporation Law. This summary assumes the automatic conversion of all of the outstanding shares of our Series&nbsp;B preferred stock and
Series&nbsp;C preferred stock into shares of our common stock based on a one-to-one conversion ratio. This summary is intended as a summary only and is qualified in its
entirety by reference to our certificate of incorporation, by-laws, investor rights agreement and rights plan, all of which are filed as exhibits to the registration statement
of which this prospectus forms&nbsp;a part, and to the applicable provisions of the Delaware General Corporation Law. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the closing of this offering, our authorized capital stock will consist of 200,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock,
par value $0.001 per share. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of November&nbsp;8, 2011, we had outstanding: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>10,507,929 shares of common stock, held of record by 41 stockholders,  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>options to acquire 1,652,688 shares of our common stock, and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>warrants exercisable for 726,960 shares of our common stock. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> COMMON STOCK  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not
have cumulative voting rights. Any election of directors by our stockholders will be determined by a plurality of the votes cast by the stockholders entitled to vote in the election. Holders of common
stock are entitled to receive ratably any dividends declared by our board of directors, subject to any preferential dividend rights of then-outstanding preferred stock. See "Dividend
Policy." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
the event of our liquidation, dissolution or winding up, the holders of our common stock are entitled to receive ratably our net assets available for distribution to stockholders
after the payment of all debts and other liabilities and subject to the prior rights of any then-outstanding preferred stock. Holders of common stock have no preemptive, subscription,
redemption or conversion rights. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> PREFERRED STOCK  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon the closing of this offering, no shares of preferred stock will be outstanding and our board of directors will be authorized,
without action by our stockholders, to from time to time designate and issue up to an aggregate of 5,000,000 shares of preferred stock in one or more series. Our board of directors has the discretion
to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of
preferred stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
issuance of preferred stock could have the effect of restricting dividends on our common stock, diluting the voting power of our common stock, impairing the liquidation rights of our
common stock or delaying, deterring or preventing a change in control. Such issuance could have the effect of decreasing the market price of the common stock. The issuance of preferred stock or even
the ability to issue preferred stock could also have the effect of delaying, deterring or preventing a change in control. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>144</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
the closing of this offering, we will be authorized to issue up to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of Series&nbsp;A Junior Participating Preferred Stock, par value $0.001 per share, or
Series&nbsp;A junior preferred stock, none of which are issued and outstanding. Each share of Series&nbsp;A junior preferred stock will be entitled, when, as and if declared by our board of
directors, or upon the declaring of any dividend (other than a common stock dividend) payable to the holders of our common stock to a minimum preferential quarterly dividend payment equal to the
greater of (i)&nbsp;$0.001 per share, and (ii)&nbsp;an amount equal to 10,000 times the dividend declared per share of our common stock. Such dividends shall accrue and accumulate starting upon
the date such Series&nbsp;A junior preferred stock were issued, the record date for the preferential dividend payment or the date of the preferential quarterly dividend payment, depending on the
circumstances triggering the dividend payment. In the event of our liquidation, dissolution or winding up, holders of the Series&nbsp;A junior preferred stock will be entitled to a minimum
preferential payment of $10,000 per share (plus any accrued but unpaid dividends, whether or not declared, to the date of payment). Each share of Series&nbsp;A junior preferred stock will have
10,000 votes, and, generally, holders of shares of Series&nbsp;A junior preferred stock and the holders of shares of our common stock will vote together as one class on matters submitted to a vote
of our stockholders. In the event of any merger, consolidation or other transaction in which outstanding shares of our common stock are converted or exchanged, each share of Series&nbsp;A junior
preferred stock will be entitled to receive 10,000 times the amount received per share of common stock. These rights are protected by customary antidilution provisions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because
of the nature of the Series&nbsp;A junior preferred stock's dividend, liquidation and voting rights, the value of the one ten-thousandth of a share of
Series&nbsp;A junior preferred stock issuable upon exercise of each right issued under our rights plan should approximate the value of one share of our common stock. Holders of shares of
Series&nbsp;A junior preferred stock have no preemptive, subscription, redemption or conversion rights. See "&#151;Anti-Takeover Considerations&#151;Stockholder rights
plan." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
currently have no plans to issue any shares of preferred stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> REGISTRATION RIGHTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are party to an amended and restated investor rights agreement that provides that holders
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of our common
stock, including shares of common stock issuable upon the conversion of our Series&nbsp;B preferred stock and Series&nbsp;C preferred stock in connection with this offering, with the right in
specified circumstances to require us to register their shares under the Securities Act of 1933 for resale to the public. These shares are referred to as registrable securities. The investor rights
agreement terminates on the fifth anniversary of the closing of this offering or, with respect to any holder of registrable securities, if earlier, on the date such holder has disposed of all its
registrable securities. A summary of the registration rights held by holders of registrable securities pursuant to the investor rights agreement follows. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Demand registration rights  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning on the earlier of February&nbsp;10, 2016 and six months following the closing of this offering, holders of at least 30% of
the outstanding registrable securities can, on not more than two occasions, request that we file&nbsp;a registration statement under the Securities Act in order to register all or any part of the
registrable securities held by such holders, subject to certain conditions and limitations. The aggregate registrable securities requested to be registered pursuant to such request must have an
anticipated aggregate public offering price, net of underwriting discounts and commissions, of at least $5,000,000. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
our board of directors believes in good faith that it would be materially detrimental to us to proceed with a registration at the time the demand is made, we may delay the
registration twice in any 12-month period for a period not to exceed 90&nbsp;days. Also, if the holders of registrable securities </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>145</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>requesting
registration request that the shares be offered for distribution through an underwritten offering, we may reduce the number of registrable securities to be registered upon the advice of the
underwriters for the offering. If shares of our stock requested to be included in a registration must be excluded pursuant to the underwriters' advice, we will generally register a pro rata portion of
the shares requested to be registered. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Piggyback registration rights  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to certain limitations, holders of registration rights pursuant to the amended and restated investor rights agreement have
unlimited rights to request that their registrable securities be included in any registration of our common stock that we initiate. However, these holders have no registration rights with respect to
registrations relating solely to employee benefit plans or registrations on certain registration statement forms. The holders of piggyback registration rights have waived their rights to include any
of their registrable securities in this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Form&nbsp;S-3 registration rights  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After we have qualified for registration on Form&nbsp;S-3, which will not occur until at least 12&nbsp;months after we
have become a public reporting company, holders of at least 10% of the outstanding registrable securities may request in writing that we effect registration of their shares on
Form&nbsp;S-3, provided that the offering proceeds of the shares proposed to be registered on behalf of our stockholders, net of underwriting discounts and commissions, in each
registration is at least $3,000,000. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
our board of directors believes in good faith that it would be materially detrimental to us to proceed with an S-3 registration at the time the demand is made, we may
delay the registration twice in any 12-month period for a period not to exceed 90&nbsp;days. In addition, we are not required to make any registration on Form&nbsp;S-3
under the amended and restated investor rights agreement if we have effected another registration pursuant to the Form&nbsp;S-3 registration rights on behalf of the holders of
registrable securities within six months prior to the request. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Transferability  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registration rights are generally transferable to affiliates and any transferee who acquires at least 250,000 shares of registrable
securities from the transferor. The letter agreement we entered into with Tanfield restricts Tanfield's ability to transfer its rights under the investor rights agreement to a third party in
connection with any transfer by Tanfield of 10% or more of our outstanding common stock unless such third party agrees to abide by the standstill provisions set forth in the letter agreement. See
"Relationships and Related Person Transactions&#151;Tanfield Transactions&#151;Tanfield letter agreement." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Expenses  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally, we are required to bear all registration and selling expenses incurred in connection with the demand, piggyback and
Form&nbsp;S-3 registrations described above, other than underwriting discounts and commissions. We are also required to bear the reasonable fees and expenses, not to exceed $50,000, of
one counsel for the selling stockholders in each registration. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> ANTI-TAKEOVER CONSIDERATIONS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our certificate of incorporation, by-laws and rights plan, all of which will be in effect upon the closing of this
offering, contain certain provisions that could have the effect of delaying, deterring or preventing another party from acquiring control of us. These provisions and certain provisions of Delaware
law, which are summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed, in part, to encourage persons seeking to </FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>acquire
control of us to negotiate first with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate more favorable terms with an unfriendly
or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us. It is possible, however, that these provisions could make it more difficult to accomplish transactions that
stockholders might otherwise deem to be in their best interests. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Provisions of our certificate of incorporation and by-laws  </B></FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Undesignated preferred stock.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;As discussed above, our
board of directors has the ability to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions
may have the effect of deterring hostile takeovers or delaying changes in control or management of our company.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Limits on ability of stockholders to act by written consent or call a special
meeting.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our certificate of incorporation provides that our stockholders may not act by written consent, which may lengthen the amount
of time required to take stockholder actions. As a result, a holder controlling a majority of our capital stock would not be able to amend our by-laws or remove directors without holding a
meeting of our stockholders called in accordance with our by-laws. </FONT></DD></DL>
</UL>
<UL>
<UL>

<P style="font-family:times;"><FONT SIZE=2>Additionally,
our by-laws provide that special meetings of stockholders may be called only by the chairperson of the board, our chief executive officer or our board of directors.
Stockholders may not call a special meeting, which may delay the ability of our stockholders to force consideration of a proposal or for holders controlling a majority of our capital stock to take any
action, including the removal of directors.  </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Requirements for advance notification of stockholder nominations and
proposals.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our by-laws establish advance notice procedures with respect to stockholder proposals and the nomination of
candidates for election as directors, other than nominations made by or at the direction of our board of directors or a committee of our board of directors. These provisions may have the effect of
precluding the conduct of certain business at a meeting if the proper procedures are not followed. These provisions also may discourage or deter a potential acquirer from conducting a solicitation of
proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Board classification.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Following the closing of this
offering, our board of directors will be divided into three classes, one class of which is elected each year by our stockholders. The directors in each class will serve for a three-year
term. For more information on our classified board, see "Management&#151;Board of Directors." A third party may be discouraged from making a tender offer or otherwise attempting to obtain
control of us as it is it more difficult and time-consuming for stockholders to replace a majority of the directors on a classified board.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>No cumulative voting.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our certificate of incorporation and
by-laws do not permit cumulative voting in the election of directors. Cumulative voting allows a stockholder to vote a portion or all of its shares for one or more candidates for seats on
the board of directors. Without cumulative voting, a minority stockholder may not be able to gain as many seats on our board of directors as the stockholder would be able to gain if cumulative voting
were permitted, which makes it more difficult for a minority stockholder to influence our board's decision regarding a takeover.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Amendment of charter provisions.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The amendment of the
provisions of our certificate of incorporation described above and the amendment by stockholders of the by-laws described above require approval by holders of at least 75% of our
outstanding capital stock entitled to vote generally in the election of directors. </FONT></DD></DL>
</UL>
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<P style="font-family:times;"><FONT SIZE=2><B> Stockholder rights plan  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has adopted a rights plan that will be effective upon the closing of this offering and has declared a dividend
of one preferred stock purchase right, or a right, for each outstanding share of our common stock held of record as of the close of business on the closing date of this offering. The rights are not
intended to prevent a takeover of us and will not do so; however, the rights have certain anti-takeover effects. The rights will cause substantial dilution to a person or group that
attempts to acquire us on terms not approved by our board and without conditioning the offer on a substantial number of rights being acquired. Accordingly, the existence of the rights may deter
certain acquirors from making takeover proposals or tender offers. However, the rights are intended to help ensure that our stockholders receive fair and equal treatment in the event of any proposed
takeover of us. Our entry into the rights plan was not in response to any
specific takeover threat or proposal, but is a precaution taken to protect the rights of our stockholders.  </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>The rights.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Each right initially represents the right to
purchase, for $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, which we refer to as the purchase price, one ten-thousandth of a share of the Series&nbsp;A junior preferred stock. The rights will attach to all shares
of our common stock issued after the closing of this offering and prior to the rights becoming exercisable. Prior to the distribution date referred to below, the rights will be represented only by the
stock certificates (or book entry records) evidencing shares of our common stock to which the rights are attached. Prior to exercise, a right does not give its holder any rights as stockholder. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Exercisability.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;The rights are not exercisable until the
occurrence of a distribution date. After the distribution date, the rights may be transferred on the books and records of the rights agent as provided in the rights agreement. A distribution date is
the earlier of: (i)&nbsp;the 10th&nbsp;day after public announcement that any person or group has become an acquiring person and (ii)&nbsp;the 10th&nbsp;business day after the commencement of
a tender or exchange offer by a person or group (other than us, any of our subsidiaries or any of our or our subsidiaries' employee benefit or stock ownership plans) for 15% or more of the
then-outstanding shares of our common stock. </FONT></DD></DL>
</UL>
<UL>
<UL>

<P style="font-family:times;"><FONT SIZE=2>An
acquiring person, generally, is a person or group (other than us, any of our subsidiaries or any of our or our subsidiaries' employee benefit or stock ownership plans) that has become the
beneficial owner of 15% or more of the then-outstanding shares of our common stock. However, no such person or group will be deemed an acquiring person if: </FONT></P>

<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the person or group beneficially owns 15.0% or more of the outstanding shares of our common stock as of the closing date
of this offering and does not acquire any additional shares (except in connection with any of the events referred to in clauses&nbsp;(i) through (iii)&nbsp;below);  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the person or group becomes the beneficial owner of 15% or more of our outstanding common stock after the closing of this
offering solely as a result of (i)&nbsp;a reduction in the number of shares of outstanding common stock, (ii)&nbsp;the exercise of, or lapse of restrictions on, any options, warrants, rights or
similar interests granted by us to our directors, officers or employees, or (iii)&nbsp;any unilateral grant of any security by us, and, in any such case does not acquire any additional shares of our
common stock (except through the subsequent occurrence of any of the events referred to in the preceding clauses&nbsp;(i) through (iii)); or  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our board of directors determines that the person or group has become an acquiring person inadvertently and the person or
group promptly divests (or enters into an irrevocable commitment to divest) enough common stock to reduce its beneficial ownership percentage below 15%. </FONT></DD></DL>
</UL>
<UL>

<P style="font-family:times;"><FONT SIZE=2>After
a distribution date, any rights beneficially owned by an acquiring person (or any transferee of the acquiring person) will become null and void and may not be exercised. All other rights </FONT></P>

</UL>
</UL>
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<UL>
<UL>

<P style="font-family:times;"><FONT SIZE=2>holders
will have the right to receive, upon exercise of their rights and payment of the purchase price, that number of shares of our Series&nbsp;A junior preferred stock having a market value equal
to twice the purchase price.  </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Exchange.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;At any time after any person or group has become
an acquiring person (but before any person or group becomes the beneficial owner of 50% or more of our common stock), our board may, at its option, elect to exchange all or part of the outstanding and
exercisable rights (other than the rights beneficially owned by the acquiring person or any transferee of an acquiring person) at an exchange ratio of one share of common stock per right, subject to
adjustment as set forth in the rights agreement. The rights cannot be exercised following our board's determination to effect a rights exchange.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Redemption.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;At any time before a person or group becomes
an acquiring person, our board of directors may, at its option, redeem all, but not less than all, of the then-outstanding rights at a redemption price of $0.0001 per right, subject to
adjustment as set forth in the rights agreement. The rights cannot be exercised following the board's determination to redeem the rights.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Expiration.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Unless earlier exercised, the rights (and the
rights agreement) will expire on the earliest of (i)&nbsp;the tenth anniversary of the closing date of this offering, (ii)&nbsp;the redemption of the rights and (iii)&nbsp;any exchange of the
rights.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Amendments.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our board of directors may amend or supplement
the rights agreement without the consent of the rights holders at any time prior to the distribution date. After the distribution date, without the consent of the rights holders, the board may amend
or supplement the rights agreement only to cure an ambiguity, alter time period provisions, correct inconsistent provisions or make other changes that do not adversely affect any rights holder. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2><I>Anti-Dilution Provisions.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;Our board may adjust
the purchase price, the exchange ratio, the redemption price, the number of shares of Series&nbsp;A junior preferred stock issuable upon exercise of the rights and the number of outstanding rights
to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of our common stock. Subject to certain limited
exceptions, no adjustments to the purchase price of less than 1% will be made. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> Delaware anti-takeover statute  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to the provisions of Section&nbsp;203 of the Delaware General Corporation Law regulating corporate takeovers. In
general, Section&nbsp;203 prohibits a publicly held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three
years following the date the person became an interested stockholder unless: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>prior to the date of the transaction, the board of directors of the corporation approved either the business combination
or the transaction which resulted in the stockholder becoming an interested stockholder;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>upon completion of the transaction that 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, calculated as provided under Section&nbsp;203; or  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>at or subsequent to the date of the transaction, the business combination is approved by the board of directors of the
corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock which
is not owned by the interested stockholder. </FONT></DD></DL>
</UL>
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally,
a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder
is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own, 15% or more of a corporation's outstanding
voting stock. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate
that Section&nbsp;203 may discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> DELAWARE AS SOLE AND EXCLUSIVE FORUM  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our certificate of incorporation provides that the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for
(i)&nbsp;any derivative action or proceeding brought on behalf us, (ii)&nbsp;any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to us or our
stockholders, (iii)&nbsp;any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law or our amended and restated certificate of incorporation or
amended and restated by-laws or (iv)&nbsp;any action asserting a claim against us governed by the internal affairs doctrine, in each case, except to the extent otherwise agreed to by our board of
directors or to the extent personal jurisdiction cannot be obtained over an indispensable party to the action. As a result, any action brought by any of our stockholders with regard to any of these
matters will need to be filed in the Court of Chancery of the State of Delaware and cannot be filed in any other jurisdiction. The amendment of this provision of our certificate of incorporation
requires approval by holders of at least 75% of our outstanding capital stock entitled to vote generally in the election of directors. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> TRANSFER AGENT AND REGISTRAR  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer agent and registrar for our common and preferred stock will be Broadridge Corporate Issuer Solutions,&nbsp;Inc. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> THE NASDAQ GLOBAL MARKET  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have applied to have our common stock listed on The Nasdaq Global Market under the symbol "SMTH." </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>150</FONT></P>

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<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
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<A NAME="toc_ek78101_1"> </A>
<BR></FONT><FONT SIZE=2><B>  MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of the material United States federal income tax and estate tax consequences of the ownership and
disposition of our common stock to non-United States holders, but does not purport to be a complete analysis of all of the potential tax considerations relating thereto. This summary is
based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date
hereof. These authorities may be changed, possibly retroactively, so as to result in United States federal income tax or estate tax consequences different from those set forth below. We have not
sought any ruling from the Internal Revenue Service, or the IRS, with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS
will agree with such statements and conclusions. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
summary also does not address the tax considerations arising under the laws of any United States state or locality or any non-United States jurisdiction or under United
States federal gift and estate tax laws, except to the limited extent below. In addition, this discussion does not address tax
considerations applicable to an investor's particular circumstances or to investors that may be subject to special tax rules, including, without limitation: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>banks, insurance companies or other financial institutions;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>persons subject to the alternative minimum tax;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>tax-exempt organizations;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>dealers in securities or currencies;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>traders in securities that elect to use a mark-to-market method of accounting for their securities
holdings;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>persons that own, or are deemed to own, more than five percent of our capital stock (except to the extent specifically set
forth below);  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>certain former citizens or long-term residents of the United States;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>persons who hold our common stock as a position in a hedging transaction, "straddle," "conversion transaction" or other
risk reduction transaction;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>persons who do not hold our common stock as a capital asset within the meaning of Section&nbsp;1221 of the Code
(generally, for investment purposes); or  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>persons deemed to sell our common stock under the constructive sale provisions of the Code. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, if a partnership or entity classified as a partnership for United States federal income tax purposes holds our common stock, the tax treatment of a partner generally will
depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships that hold our common stock, and partners in such partnerships, should consult their tax
advisors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>You are urged to consult your tax advisor with respect to the application of the United States federal income tax laws to your particular situation, as well as
any tax consequences of the purchase, ownership and disposition of our common stock arising under the United States federal estate or gift tax rules or under the laws of any United States state or
local or any non-United States or other taxing jurisdiction or under any applicable tax treaty.</B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>151</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> NON-UNITED STATES HOLDER DEFINED  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of this discussion, you are a non-United States holder if you are any holder other
than: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>an individual citizen or resident of the United States;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the
United States, any State thereof or the District of Columbia;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>an estate whose income is subject to United States federal income tax regardless of its source; or </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a trust (x)&nbsp;whose administration is subject to the primary supervision of a United States court and which has one
or more United States persons who have the authority to control all substantial decisions of the trust or (y)&nbsp;which has made an election to be treated as a United States person. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> DISTRIBUTIONS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we make distributions on our common stock, those payments will constitute dividends for United States tax purposes to the extent
paid from our current or accumulated earnings and profits, as determined under United States federal income tax principles. To the extent those distributions exceed both our current and our
accumulated earnings and profits, they will constitute a return of capital and will first reduce your basis in our common stock, but not below zero, and then will be treated as gain from the sale of
stock (as discussed further below). </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
dividend paid to a non-United States holder generally will be subject to United States withholding tax either at a rate of 30% of the gross amount of the dividend or such
lower rate as may be specified by an applicable income tax treaty. In order to receive a reduced treaty rate, you must provide us with an IRS Form&nbsp;W-8BEN or other appropriate
version of IRS Form&nbsp;W-8 certifying qualification for the reduced rate. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends
received by you that are effectively connected with your conduct of a United States trade or business generally are exempt from such withholding tax. In order to obtain this
exemption, you must provide us with an IRS Form&nbsp;W-8ECI or other applicable IRS Form&nbsp;W-8 properly certifying such exemption. Such effectively connected dividends,
although not subject to withholding tax, are taxed at the same graduated rates applicable to United States persons, net of certain deductions and credits, subject to an applicable income tax treaty
providing otherwise. In addition, if you are a corporate non-United States holder, dividends you receive that are effectively connected with your conduct of a United States trade or
business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If
you do not timely provide us with the required certification for the exemption from or reduction of United States withholding tax, but are eligible for a reduced rate of withholding
tax pursuant to a tax treaty, you may be able to obtain a refund of any excess amounts currently withheld if you file an appropriate claim for refund with the IRS. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> GAIN ON SALE OR OTHER DISPOSITION OF COMMON STOCK  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You generally will not be required to pay United States federal income tax on any gain realized upon the sale or other disposition of
our common stock unless: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the gain is effectively connected with your conduct of a United States trade or business (and, if an income tax treaty
applies, the gain is attributable to a permanent establishment maintained by you in the United States), in which case you will be required to pay tax on the net gain derived from the sale under
regular graduated United States federal income tax rates, and for a </FONT></DD></DL>
</UL>
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<UL>
<UL>

<P style="font-family:times;"><FONT SIZE=2>non-United
States holder that is a corporation, such non-United States holder may be subject to the branch profits tax at a 30% rate or such lower rate as may be specified by
an applicable income tax treaty;  </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>you are an individual who is present in the United States for a period or periods aggregating 183&nbsp;days or more
during the calendar year in which the sale or disposition occurs and certain other conditions are met, in which case you will be required to pay a flat 30% tax on the gain derived from the sale, which
tax may be offset by United States source capital losses (even though you are not considered a resident of the United States) (subject to applicable income tax or other treaties); or </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our common stock constitutes a United States real property interest by reason of our status as a "United States real
property holding corporation" for United States federal income tax purposes, or a USRPHC, at any time within the shorter of the five-year period preceding the disposition or your holding
period for our common stock. We believe that we are not currently and will not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our
United States real property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC,
however, as long as our common stock is regularly traded on an established securities market, such common stock will be treated as United States real property interests only if you actually or
constructively hold more than five percent of such regularly traded common stock at any time during the applicable period that is specified in the Code. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> UNITED STATES FEDERAL ESTATE TAX  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock held (or treated as held) by an individual non-United States holder at the time of death will be included
in such holder's gross estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise, and therefore may be subject to United States federal estate
tax. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> BACKUP WITHHOLDING AND INFORMATION REPORTING  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally, we must report annually to the IRS the amount of dividends paid to you, your name and address, and the amount of tax
withheld, if any. A similar report will be sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in your country of
residence. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments
of dividends or of proceeds on the disposition of stock made to you may be subject to additional information reporting and backup withholding at a current rate of 28% unless you
establish an exemption, for example by properly certifying your non-United States status on a Form&nbsp;W-8BEN or another appropriate version of IRS
Form&nbsp;W-8. Notwithstanding the foregoing, backup withholding and information reporting may apply if either we or our paying agent has actual knowledge, or reason to know, that you
are a United States person. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information
reporting requirements, but not backup withholding, will also generally apply to payments of the proceeds of a sale, exchange or other disposition of our common stock by
non-U.S. offices of U.S. brokers or non-U.S. brokers with certain types of
relationships to the United States unless the non-United States holder establishes an exemption. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Backup
withholding is not an additional tax; rather, the United States income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>153</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> RECENTLY ENACTED LEGISLATION AFFECTING TAXATION OF OUR COMMON STOCK HELD BY OR THROUGH FOREIGN ENTITIES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recently enacted legislation generally will impose a United States federal withholding tax of 30% on dividends and the gross proceeds
of a disposition of our common stock paid after December&nbsp;31, 2012 to a "foreign financial institution" (as specially defined under these rules), unless such institution enters into an agreement
with the United States government to withhold on certain payments and to collect and provide to the United States tax authorities substantial information regarding United States account holders of
such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with United States owners). The legislation also will
generally impose a United States federal withholding tax of 30% on dividends and the gross proceeds of a disposition of our common stock paid after December&nbsp;31, 2012 to a
non-financial foreign entity unless such entity provides the withholding agent with a certification identifying the direct and indirect United States owners of the entity. Under certain
circumstances, a non-United States holder might be eligible for refunds or credits of such taxes. Prospective investors are encouraged to consult with their own tax advisors regarding the
possible implications of this legislation on their investment in our common stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>The preceding discussion of United States federal tax considerations for non-United States holders is for general information only. It is not tax
advice. Each prospective investor should consult its own tax advisor regarding the particular United States federal, state and local and non-United States tax consequences of purchasing,
holding and disposing of our common stock, including the consequences of any proposed change in applicable laws.</B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>154</FONT></P>

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<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="em78101_underwriting"> </A>
<A NAME="toc_em78101_1"> </A>
<BR></FONT><FONT SIZE=2><B>  UNDERWRITING    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are offering the shares of our common stock described in this prospectus through the underwriters named below. UBS
Securities&nbsp;LLC and Merrill Lynch, Pierce, Fenner&nbsp;&amp; Smith Incorporated are acting as joint book-running managers of this offering and as the representatives of the
underwriters. We have entered into an underwriting agreement with the representatives. Subject to the terms and condition of the underwriting agreement, each of the underwriters has severally agreed
to purchase the number of shares of common stock listed next to its name in the following table. </FONT></P>
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<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
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<TH NOWRAP  COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:46pt;"><FONT SIZE=1><B>Underwriters

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 </B></FONT></DIV></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of shares </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>UBS Securities&nbsp;LLC</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>Merrill Lynch, Pierce, Fenner&nbsp;&amp; Smith<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incorporated</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
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<TD COLSPAN=2 style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Total</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
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 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriting agreement provides that the underwriters must buy all of the shares if they buy any of them. However, the underwriters are not required to take or pay for the shares
covered by the underwriters' over-allotment option described below. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
common stock is offered subject to a number of conditions, including: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>receipt and acceptance of our common stock by the underwriters; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the underwriters' right to reject orders in whole or in part. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have been advised by the representatives that the underwriters intend to make a market in our common stock but that they are not obligated to do so and may discontinue making a market
at any time without notice. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with this offering, certain of the underwriters or securities dealers may distribute prospectuses electronically. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> OVER-ALLOTMENT OPTION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have granted the underwriters an option to buy up to an aggregate
of&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional shares of our common stock. The
underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with this offering. The underwriters have 30&nbsp;days from the date
of this prospectus to exercise this option. If the underwriters exercise this option, they will each purchase additional shares approximately in proportion to the amounts specified in the table above. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> COMMISSIONS AND DISCOUNTS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares sold by the underwriters to the public will initially be offered at the initial offering price set forth on the cover of this
prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per share from the initial public offering price. Sales of shares made
outside
of the United States may be made by affiliates of the underwriters. If all of the shares are not sold at the initial public offering price, the representatives may change the offering price and the
other selling terms. Upon execution of the underwriting agreement, the underwriters will be obligated to purchase the shares at the prices and upon the terms stated therein. </FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table shows the per share and total underwriting discounts and commissions we will pay to the underwriters assuming both no exercise and full exercise of the underwriters'
option to purchase up to&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional shares. </FONT></P>
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<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>No exercise </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Full exercise </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
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<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Per share</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
estimate that the total expenses of this offering payable by us, not including the underwriting discounts and commissions, will be approximately $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> NO SALES OF SIMILAR SECURITIES  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We, our executive officers and directors, and the holders of substantially all of our outstanding shares of common and preferred stock
and the holders of substantially all of our currently outstanding options, warrants and convertible debentures have entered into lock-up agreements with the underwriters. Under these
agreements, subject to certain exceptions, we and each of these persons may not, without the prior written approval of UBS Securities&nbsp;LLC and Merrill Lynch, Pierce, Fenner&nbsp;&amp; Smith
Incorporated offer, sell, contract to sell, pledge, or otherwise dispose of, directly or indirectly, or hedge our common stock or securities convertible into or exchangeable or exercisable for our
common stock, except in the circumstances described below. These restrictions will be in effect for a period of 180&nbsp;days (or 365&nbsp;days in the case of Tanfield) after the date of this
prospectus, which period is subject to extension in the circumstances described in the paragraph below. At any time, UBS Securities&nbsp;LLC and Merrill Lynch, Pierce, Fenner&nbsp;&amp; Smith
Incorporated may, in their sole discretion, release some or all the securities from these lock-up agreements. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Notwithstanding
the above, if (i)&nbsp;during the period beginning on the date that is 15 calendar days plus three business days before the last day of the 180-day (or
365-day, in the case of Tanfield) period described in the paragraph above, or the initial lock-up period, and ends on the last day of the initial lock-up period, we
issue an earnings release or material news or a material event relating to us occurs; or (ii)&nbsp;prior to the expiration of the initial
lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the initial lock-up period, then the
restrictions imposed by these lock-up agreements will continue to apply until the expiration of the date that is 15 calendar days plus three business days after the date on which the
issuance of the earnings release or the material news or material event occurs. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
restrictions set forth above shall not apply to our issuance of shares of our common stock described below: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the registration of the offer and sale of the shares of our common stock described in this prospectus; </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the issuance by us of shares of common stock upon the exercise or conversion of options, warrants, convertible preferred
stock or convertible debentures disclosed as outstanding in this prospectus; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the issuance to employees, contractors or directors of restricted stock grants or stock options not exercisable during the
lock-up period pursuant to equity incentive plans described in this prospectus. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
restrictions set forth above shall not apply to the following types of transfers of shares of our common stock, or securities convertible into or exchangeable or exercisable for our
common stock, by </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>156</FONT></P>

<HR NOSHADE>
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<BR>

<P style="font-family:times;"><FONT SIZE=2>any
of our directors, executive officers or the holders of our shares or convertible securities in the following circumstances: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the sale of our common stock by the selling stockholders in this offering;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a bona fide gift; provided that the recipient thereof executes a lock-up agreement for the remainder of the
lock-up period;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a disposition to any trust for the direct or indirect benefit of the holder and/or the holder's immediate family;
provided, that (i)&nbsp;such disposition does not involve a disposition for value and (ii)&nbsp;such trust executes a lock-up agreement for the remainder of the lock-up
period; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>a transaction relating to any of our securities acquired in open market transactions after the completion of this
offering, provided that no filing under Section&nbsp;16(a) of the Exchange Act is required or voluntarily made in connection with such transactions. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> INDEMNIFICATION  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreed to indemnify the several underwriters against certain liabilities, including certain liabilities under the Securities
Act. If we are unable to provide this indemnification, we have agreed to contribute to payments the underwriters may be required to make in respect of those liabilities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> NASDAQ GLOBAL MARKET LISTING  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have applied to list our common stock on The Nasdaq Global Market under the symbol "SMTH." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> PRICE STABILIZATION, SHORT POSITIONS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with this offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of
our common stock, including: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>stabilizing transactions;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>short sales;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>purchases to cover positions created by short sales;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>imposition of penalty bids; and  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>syndicate covering transactions. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our common stock while this offering is in
progress. These transactions may also include making short sales of our common stock, which involve the sale by the underwriters of a greater number of shares of common stock than they are required to
purchase in this offering and purchasing shares of common stock on the open market to cover short positions created by short sales. Short sales may be "covered short sales," which are short positions
in an amount not greater than the underwriters' over-allotment option referred to above, or may be "naked short sales," which are short positions in excess of that amount. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriters may close out any covered short position by either exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market.
In making this determination, the underwriters will consider, among other things, the price of shares
available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>157</FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Naked
short sales are in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short
position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors
who purchased in this offering. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the
representatives have repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a result of these activities, the price of our common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be
discontinued by the underwriters at any time. The underwriters may carry out these transactions on The Nasdaq Global Market, in the over-the-counter market or otherwise. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> DETERMINATION OF OFFERING PRICE  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to this offering, there was no public market for our common stock. The initial public offering price will be determined by
negotiation by us and the representatives of the underwriters. The principal factors to be considered in determining the initial public offering price include: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the information set forth in this prospectus and otherwise available to representatives;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our history and prospects and the history and prospects for the industry in which we compete;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our past and present financial performance and an assessment of our management;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>our prospects for future earnings and the present state of our development;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the general condition of the securities markets at the time of this offering;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>the recent market prices of, and demand for, publicly-traded common stock of generally comparable companies; and </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>other factors deemed relevant by the underwriters and us. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B> AFFILIATIONS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may
include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The
underwriters and their respective affiliates may from time to time in the future engage with us and perform services for us in the ordinary course of their business for which they will receive
customary fees and expenses. In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively
trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment
and securities activities may involve securities and/or instruments of us or our subsidiaries. The underwriters and their respective affiliates may also make investment recommendations and/or publish
or express independent research views in respect of these securities or
instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in these securities and instruments. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>158</FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2><B> NOTICE TO INVESTORS  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Notice to prospective investors in the European Economic Area  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In relation to each Member State of the European Economic Area, or EEA, which has implemented the Prospectus Directive (each, a
"Relevant Member State"), with effect from, and including, the date on which the Prospectus Directive is implemented in that Relevant Member State (the "Relevant Implementation Date"), an offer to the
public of our securities which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State, except that, with effect from, and including, the Relevant
Implementation Date, an offer to the public in that Relevant Member State of our securities may be made at any time under the following exemptions under the Prospectus Directive, if they have been
implemented in that Relevant Member State: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>to legal entities which are authorized or regulated to operate in the financial markets, or, if not so authorized or
regulated, whose corporate purpose is solely to invest in our securities;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>to any legal entity which has two or more of: (i)&nbsp;an average of at least 250 employees during the last (or, in
Sweden, the last two) financial year(s); (ii)&nbsp;a total balance sheet of more than &euro;43,000,000 and (iii)&nbsp;an annual net turnover of more than &euro;50,000,000, as
shown in its last (or, in Sweden, the last two) annual or consolidated accounts;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>to fewer than 100 natural or legal persons or, if the Relevant Member State has implemented the relevant provision of the
2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the representative for any
such offer; or  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>in any other circumstances falling within Article&nbsp;3(2) of the Prospectus Directive provided that no such offer of
our securities shall result in a requirement for the publication by us or any underwriter or agent of a prospectus pursuant to Article&nbsp;3 of the Prospectus Directive. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
used above, the expression "offered to the public" in relation to any of our securities in any Relevant Member State means the communication in any form and by any means of sufficient
information on the terms of the offer and our securities to be offered so as to enable an investor to decide to purchase or subscribe for our securities, as the same may be varied in that Member State
by any measure implementing the Prospectus Directive in that Member State and the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending
Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State; and the expression "2010 PD Amending Directive" means
Directive 2010/73/EU. The EEA selling restriction is in addition to any other selling restrictions set out in this prospectus. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Notice to prospective investors in the United Kingdom  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus is only being distributed to and is only directed at: (i)&nbsp;persons who are outside the United Kingdom;
(ii)&nbsp;investment professionals falling within Article&nbsp;19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"); or (iii)&nbsp;high net worth
companies, and other persons to whom it may lawfully be communicated, falling within Article&nbsp;49(2)(a) to (d)&nbsp;of the Order (all such persons falling within (i)-(iii) together being
referred to as "relevant persons"). The shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such shares will be engaged in only with,
relevant persons. Any person who is not a relevant person should not act or rely on this prospectus or any of its contents. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>159</FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2><A
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<P style="font-family:times;"><FONT SIZE=2><B> Notice to prospective investors in Switzerland  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The prospectus does not constitute an issue prospectus pursuant to Article&nbsp;652a or Article&nbsp;1156 of the Swiss Code of
Obligations ("CO") and the shares will not be listed on the SIX Swiss Exchange. Therefore, the prospectus may not comply with the disclosure standards of the CO and/or the listing rules (including any
prospectus schemes) of the SIX Swiss Exchange. Accordingly, the shares may not be offered to the public in or from Switzerland, but only to a selected and limited circle of investors, which do not
subscribe to the shares with a view to distribution. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Notice to prospective investors in Australia  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus is not a formal disclosure document and has not been, nor will be, lodged with the Australian Securities and
Investments Commission. It does not purport to contain all information that an investor or their professional advisers would expect to find in a prospectus or other disclosure document (as defined in
the Corporations Act 2001 (Australia)) for the purposes of Part&nbsp;6D.2 of the Corporations Act 2001 (Australia) or in a product disclosure statement for the purposes of Part&nbsp;7.9 of the
Corporations Act 2001 (Australia), in either case, in relation to the securities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
securities are not being offered in Australia to "retail clients" as defined in sections&nbsp;761G and 761GA of the Corporations Act 2001 (Australia). This offering is being made
in Australia solely to "wholesale clients" for the purposes of section&nbsp;761G of the Corporations Act 2001 (Australia) and, as such, no prospectus, product disclosure statement or other
disclosure document in relation to the securities has been, or will be, prepared. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
prospectus does not constitute an offer in Australia other than to wholesale clients. By submitting an application for our securities, you represent and warrant to us that you are a
wholesale client for the purposes of section&nbsp;761G of the Corporations Act 2001 (Australia). If any recipient of this prospectus is not a wholesale client, no offer of, or invitation to apply
for, our securities shall be deemed to be made to such recipient and no applications for our securities will be accepted from such recipient. Any offer to a recipient in Australia, and any agreement
arising from acceptance of such offer, is personal and may only be accepted by the recipient. In addition, by applying for our securities
you undertake to us that, for a period of 12&nbsp;months from the date of issue of the securities, you will not transfer any interest in the securities to any person in Australia other than to a
wholesale client. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Notice to prospective investors in Hong Kong  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our securities may not be offered or sold in Hong Kong, by means of this prospectus or any document other than (i)&nbsp;to
"professional investors" within the meaning of the Securities and Futures Ordinance (Cap.&nbsp;571, Laws of Hong Kong) and any rules made thereunder, or (ii)&nbsp;in circumstances which do not
constitute an offer to the public within the meaning of the Companies Ordinance (Cap.&nbsp;32, Laws of Hong Kong), or (iii)&nbsp;in other circumstances which do not result in the document being a
"prospectus" within the meaning of the Companies Ordinance (Cap.&nbsp;32, Laws of Hong Kong). No advertisement, invitation or document relating to our securities may be issued or may be in the
possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere) which is directed at, or the contents of which are likely to be accessed or read by, the public in
Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the securities which are or are intended to be disposed of only to persons outside Hong Kong
or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap.&nbsp;571, Laws of Hong Kong) and any rules made thereunder. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> Notice to prospective investors in Japan  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the "Financial
Instruments and Exchange Law") and our securities will not be </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>160</FONT></P>

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<BR>

<P style="font-family:times;"><FONT SIZE=2>offered
or sold, directly or indirectly, in Japan, or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other
entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan, or to a resident of Japan, except pursuant to an exemption from the
registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Notice to prospective investors in Singapore  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This document has not been registered as a prospectus with the Monetary Authority of Singapore and in Singapore, the offer and sale of
our securities is made pursuant to exemptions provided in sections&nbsp;274 and 275 of the Securities and Futures Act, Chapter&nbsp;289 of Singapore ("SFA"). Accordingly, this prospectus and any
other document or material in connection with the offer or sale, or invitation for subscription or purchase, of our securities may not be circulated or distributed, nor may our securities be offered
or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i)&nbsp;to an institutional investor as defined in
Section&nbsp;4A of the SFA pursuant to Section&nbsp;274 of the SFA, (ii)&nbsp;to a relevant person as defined in section&nbsp;275(2) of the SFA pursuant to Section&nbsp;275(1) of the SFA, or
any person pursuant to Section&nbsp;275(1A) of the SFA, and in accordance with the conditions specified in Section&nbsp;275 of the SFA, or (iii)&nbsp;otherwise pursuant to, and in accordance
with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with the conditions (if any) set forth in the SFA. Moreover, this document is not a prospectus as
defined in the SFA. Accordingly, statutory liability under the SFA in relation to the content of prospectuses would not apply. Prospective investors in Singapore should consider carefully whether an
investment in our securities is suitable for them. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Where
our securities are subscribed or purchased under Section&nbsp;275 of the SFA by a relevant person which is: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>by a corporation (which is not an accredited investor as defined in Section&nbsp;4A of the SFA) the sole business of
which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>for a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each
beneficiary of the trust is an individual who is an accredited investor;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>shares of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be
transferable for six months after that corporation or that trust has acquired the shares under Section&nbsp;275 of the SFA, except: </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>to an institutional investor, for corporations under Section&nbsp;274 of the SFA, or to a relevant person defined in
Section&nbsp;275(2) of the SFA, or any person pursuant to an offer that is made on terms that such shares of that corporation or such rights and interest in that trust are acquired at a
consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and
further for corporations, in accordance with the conditions, specified in Section&nbsp;275 of the SFA;  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>where no consideration is given for the transfer; or  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>where the transfer is by operation of law. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition, investors in Singapore should note that the securities acquired by them are subject to resale and transfer restrictions specified under Section&nbsp;276 of the SFA, and
they, therefore, should seek their own legal advice before effecting any resale or transfer of their securities. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>161</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><B> Notice to prospective investors in the Dubai International Financial Centre  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority
("DFSA"). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person.
The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth
herein and has no responsibility for the prospectus . The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares
offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>162</FONT></P>

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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="em78101_legal_matters"> </A>
<A NAME="toc_em78101_2"> </A>
<BR></FONT><FONT SIZE=2><B>  LEGAL MATTERS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The validity of the shares of common stock offered hereby will be passed upon for us by Covington&nbsp;&amp; Burling&nbsp;LLP,
Washington, DC. Sidley Austin&nbsp;LLP, Palo Alto, California, has acted as counsel to the underwriters in connection with certain legal matters related to this offering. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="em78101_experts"> </A>
<A NAME="toc_em78101_3"> </A>
<BR></FONT><FONT SIZE=2><B>  EXPERTS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The combined financial statements of Smith Electric Vehicles Corp. as of December&nbsp;31, 2010 and for the year then ended included
in this prospectus have been audited by Deloitte&nbsp;&amp; Touche&nbsp;LLP, an independent registered public accounting firm, as stated in their report appearing herein (which report expresses an
unqualified opinion on the combined financial statements and includes explanatory paragraphs referring to the ability of the Company to continue as a going concern, the allocation of corporate costs
from Tanfield, and the Company's acquisition of the assets and liabilities of SEV Group&nbsp;Ltd. and Saxon Specialist Electric Vehicles from Tanfield). Such combined financial statements have been
so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
combined financial statements of Smith Electric Vehicles Corp. as of December&nbsp;31, 2009 and for each of the two years in the period ended December&nbsp;31, 2009 included in
this prospectus have been audited by Deloitte&nbsp;LLP, an independent registered public accounting firm, as stated in their report appearing herein (which report expresses an unqualified opinion on
the combined financial statements and includes explanatory paragraphs referring to the ability of the Company to continue as a going concern, the allocation of corporate costs from Tanfield, and the
Company's acquisition of the assets and liabilities of SEV Group&nbsp;Ltd. and Saxon Specialist Electric Vehicles from Tanfield). Such combined financial statements have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting and auditing. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="em78101_where_you_can_find_more_information"> </A>
<A NAME="toc_em78101_4"> </A>
<BR></FONT><FONT SIZE=2><B>  WHERE YOU CAN FIND MORE INFORMATION    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have filed with the SEC a registration statement on Form&nbsp;S-1 regarding the shares of common stock offered hereby.
This prospectus does not contain all of the information found in the registration statement. For further information regarding us and the shares of common stock offered by this prospectus, we refer
you to the full registration statement, including its exhibits and schedules, filed under the Securities Act. The registration statement, of which this prospectus forms&nbsp;a part, including its
exhibits and schedules, may be inspected and copied at the public reference room maintained by the SEC at 100&nbsp;F Street, N.E., Washington, D.C. 20549. Copies of the materials may also be
obtained from the SEC at prescribed rates by writing to the public reference room maintained by the SEC at 100&nbsp;F Street, N.E., Washington, D.C. 20549. You may obtain information on the
operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website on the Internet at http://www.sec.gov. Our registration
statement, of which this prospectus constitutes a part, can be downloaded from the SEC's website. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>163</FONT></P>

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<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fa78101_index_to_combined_and___fa702231"> </A>
<BR></FONT><FONT SIZE=2><B>  INDEX TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
<A NAME="FA78101_TOC"></A> </FONT></P>
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<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#page_fb78101_1_2"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Reports of Independent Registered Public Accounting Firms</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#page_fb78101_1_2"><FONT SIZE=2>F-2</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#fc78101_smith_electric_vehicles_corp.___smi06476"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Combined Balance Sheets as of December&nbsp;31, 2010 and 2009
and Consolidated Balance Sheet as of June&nbsp;30, 2011 (unaudited)</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#fc78101_smith_electric_vehicles_corp.___smi06476"><FONT SIZE=2><BR>
F-4</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#fe78101_smith_electric_vehicles_corp.___smi01224"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Combined Statements of Operations for the years ended
December&nbsp;31, 2010, 2009 and 2008, Consolidated Statement of Operations for the six months ended June&nbsp;30, 2011 (unaudited) and Combined Statement of Operations for the six months ended 2010 (unaudited)</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#fe78101_smith_electric_vehicles_corp.___smi01224"><FONT SIZE=2><BR>
F-5</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#fg78101_smith_electric_vehicles_corp.___smi01204"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Combined Statements of Comprehensive Loss for the years ended
December&nbsp;31, 2010, 2009 and 2008, Consolidated Statement of Comprehensive Loss for the six months ended June&nbsp;30, 2011 (unaudited) and Combined Statement of Comprehensive Loss for the six months ended June&nbsp;30, 2010 (unaudited)
</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#fg78101_smith_electric_vehicles_corp.___smi01204"><FONT SIZE=2><BR>
F-6</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#STOCKHOLDERS_DEFICIT"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Combined Statements of Stockholders' Deficit for the years ended December&nbsp;31, 2010,
2009 and 2008 and Consolidated Statement of Stockholders' Deficit for the six months ended June&nbsp;30, 2011 (unaudited)</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#STOCKHOLDERS_DEFICIT"><FONT SIZE=2><BR>
F-7</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#fk78101_smith_electric_vehicles_corp.___smi00127"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Combined Statements of Cash Flows for the years ended
December&nbsp;31, 2010, 2009 and 2008, Consolidated Statement of Cash Flows for the six months ended June&nbsp;30, 2011 (unaudited) and Combined Statement of Cash Flows for the six months ended June&nbsp;30, 2010 (unaudited)</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#fk78101_smith_electric_vehicles_corp.___smi00127"><FONT SIZE=2><BR>
F-8</FONT></A></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD VALIGN="TOP" style="font-family:times;"><A HREF="#fo78101_smith_electric_vehicles_corp.___smi07993"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Notes to Combined and Consolidated Financial
Statements</FONT></A></TD>
<TD VALIGN="TOP" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><A HREF="#fo78101_smith_electric_vehicles_corp.___smi07993"><FONT SIZE=2><BR>
F-10</FONT></A></TD>
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fb78101_smith_electric_vehicles_corp.___smi03280"> </A>
<A NAME="toc_fb78101_1"> </A></FONT> <FONT SIZE=2><B><BR>  Smith Electric Vehicles Corp.    <BR>    <BR>    REPORT OF THE INDEPENDENT REGISTERED ACCOUNTING FIRM    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>To the Board of Directors and Stockholders of<BR>
Smith Electric Vehicles Corp.<BR>
Kansas City, Missouri </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying combined balance sheet of Smith Electric Vehicles Corp. ("Smith US") as of December&nbsp;31, 2010, and the related combined statements of operations,
comprehensive loss, stockholders' deficit, and cash flows for the year then ended. The combined financial statements include the accounts of Smith Electric Vehicles Corp., a partially owned subsidiary
of The Tanfield Group&nbsp;Plc ("Tanfield") and two related companies, SEV Group&nbsp;Ltd and Saxon Specialist Electric Vehicles, a wholly owned subsidiary and division, respectively, of Tanfield.
These companies, which are referred to collectively herein as the "Company", are under common ownership and control. As discussed in Note&nbsp;1, the financial statements of SEV Group&nbsp;Ltd and
Saxon Specialist Electric Vehicles have been derived from Tanfield's consolidated financial statements to present the historical financial position, results of operations, and cash flows of Tanfield's
vehicle maintenance and electric vehicles businesses. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audit. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
conducted our audit 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, such financial statements present fairly, in all material respects, the combined financial position of Smith Electric Vehicles Corp. at December&nbsp;31, 2010, and the
combined results of its operations and its cash flows for the year ended December&nbsp;31, 2010, in conformity with accounting principles generally accepted in the United States of America. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
accompanying combined financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note&nbsp;1 to the combined financial
statements, the Company's recurring losses from operations, negative working capital, stockholders' capital deficiency, and uncertainty around the ability to raise additional capital raise substantial
doubt about its ability to
continue as a going concern. Management's plans concerning these matters are also discussed in Note&nbsp;1. The combined financial statements do not include any adjustments that might result from
the outcome of this uncertainty. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
discussed in Note&nbsp;15, the combined financial statements of the Company include allocations of certain corporate costs from Tanfield. These costs may not be reflective of the
actual level of costs which would have been incurred had the Company operated as a separate entity apart from Tanfield. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
discussed in Notes&nbsp;1 and 15 to the combined financial statements, on January&nbsp;1, 2011, the Company acquired the assets and liabilities of SEV Group&nbsp;Ltd and Saxon
Specialist Electric Vehicles from Tanfield. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>/s/
Deloitte&nbsp;&amp;&nbsp;Touche&nbsp;LLP </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Kansas
City, Missouri<BR>
November&nbsp;9, 2011 </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-2</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
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<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> REPORT OF THE INDEPENDENT REGISTERED ACCOUNTING FIRM </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>To
the Board of Directors and Stockholders of<BR>
Smith Electric Vehicles Corp.<BR>
Kansas City, Missouri </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have audited the accompanying combined balance sheet of Smith Electric Vehicles Corp. ("Smith US") as of December&nbsp;31, 2009, and the related combined statements of operations,
comprehensive loss, stockholders' deficit, and cash flows for the years ended December&nbsp;31, 2009 and 2008. The combined financial statements include the accounts of Smith Electric Vehicles
Corp., a partially owned subsidiary of The Tanfield Group&nbsp;Plc ("Tanfield") and two related companies, SEV Group&nbsp;Ltd and Saxon Specialist Electric Vehicles, a wholly owned subsidiary and
division, respectively, of Tanfield. These companies, which are referred to collectively herein as the "Company", are under common ownership and control. As discussed in Note&nbsp;1, the financial
statements of SEV Group&nbsp;Ltd and Saxon Specialist Electric Vehicles have been derived from Tanfield's consolidated financial statements to present the historical
financial position, results of operations, and cash flows of Tanfield's vehicle maintenance and electric vehicles businesses. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
our opinion, such financial statements present fairly, in all material respects, the combined financial position of Smith Electric Vehicles Corp. at December&nbsp;31, 2009, and the
combined results of its operations and its cash flows for the years ended December&nbsp;31, 2009 and 2008, in conformity with accounting principles generally accepted in the United States of
America. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
accompanying combined financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note&nbsp;1 to the combined financial
statements, the Company's recurring losses from operations, negative working capital, stockholders' capital deficiency, and uncertainty around the ability to raise additional capital raise substantial
doubt about its ability to continue as a going concern. Management's plans concerning these matters are also discussed in Note&nbsp;1. The combined financial statements do not include any
adjustments that might result from the outcome of this uncertainty. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
discussed in Note&nbsp;15, the combined financial statements of the Company include allocations of certain corporate costs from Tanfield. These costs may not be reflective of the
actual level of costs which would have been incurred had the Company operated as a separate entity apart from Tanfield. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
discussed in Notes&nbsp;1 and 15 to the combined financial statements, on January&nbsp;1, 2011, the Company acquired the assets and liabilities of SEV Group&nbsp;Ltd and Saxon
Specialist Electric Vehicles from Tanfield. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>/s/
Deloitte&nbsp;LLP </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Newcastle-upon-Tyne,
United Kingdom<BR>
November&nbsp;9, 2011 </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-3</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=173,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=466939,FOLIO='F-3',FILE='DISK126:[11ZDO1.11ZDO78101]FB78101A.;7',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fc78101_smith_electric_vehicles_corp.___smi06476"> </A>
<A NAME="toc_fc78101_1"> </A></FONT> <FONT SIZE=2><B><BR>  Smith Electric Vehicles Corp.    <BR>    <BR>    COMBINED BALANCE SHEETS AS OF DECEMBER 31, 2010 AND 2009<BR>  AND CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2011 (UNAUDITED)    <BR>    <BR>
 (in thousands, except share and per share amounts)     <BR>    </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="9pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="42pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="42pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="56pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>ASSETS</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Current assets:</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash and cash equivalents</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,183</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,227</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accounts receivable, net</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,808</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,504</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,869</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other receivables</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,198</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,290</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Inventories</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>19,178</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>7,860</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>16,493</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other current assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,108</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,173</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,415</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total current assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>26,292</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>12,728</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>33,294</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:10pt;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Property, plant and equipment, net</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
3,611</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
2,912</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
4,747</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other long-term assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>420</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>694</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>353</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>30,323</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>16,334</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>38,394</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>LIABILITIES AND STOCKHOLDERS' DEFICIT</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Current liabilities:</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accounts payable</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>16,231</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,147</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>17,552</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Payable to Tanfield</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,730</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,293</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bridge notes, net of discount</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>13,055</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deferred revenue</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,715</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>419</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>527</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bridge note detachable warrants</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,039</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Warranty reserve</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,125</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,107</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,633</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Note payable&#151;Tanfield</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>6,250</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other current liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>4,701</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,310</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,250</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total current liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>55,596</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>13,276</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>36,212</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;A debentures, net of discount</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>9,859</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>8,930</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,031</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;A conversion option</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,612</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,340</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,052</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accrued interest</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,538</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>390</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,154</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Note payable&#151;Tanfield</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,500</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other long-term liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,149</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5,019</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,449</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>72,754</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>28,955</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>55,398</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:10pt;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Commitments and contingencies (Note&nbsp;13)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:10pt;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Convertible redeemable preferred stock: $0.001 par value and redeemable at $12.04 per share; Authorized shares&#151;6,600,000; Issued and
outstanding shares&#151;none as of December&nbsp;31, 2010 and 2009, and 4,809,007 as of June&nbsp;30, 2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
56,688</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-top:10pt;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2><B>Stockholders' deficit</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock: $0.001 par value, Authorized shares&#151;20,000,000 Issued and outstanding shares&#151;10,381,152 and 9,694,022 as of December&nbsp;31, 2010
and 2009, respectively, and 10,507,929 as of June&nbsp;30, 2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Additional paid-in capital</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,472</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,319</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,997</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Common stock warrant</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>23</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>37</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>23</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accumulated other comprehensive loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,311</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,626</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,540</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Capital deficiency of Tanfield</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,370</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3,539</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accumulated deficit</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(34,255</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(8,822</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(74,183</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total stockholders' deficit</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(42,431</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(12,621</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(73,692</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:9pt;text-indent:-9pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total liabilities, convertible redeemable preferred stock, and stockholders' deficit</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>30,323</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>16,334</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>38,394</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>
See accompanying notes to combined and consolidated financial statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-4</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=174,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=734438,FOLIO='F-4',FILE='DISK126:[11ZDO1.11ZDO78101]FC78101A.;9',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
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NAME="page_fe78101_1_5"> </A>


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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fe78101_smith_electric_vehicles_corp.___smi01224"> </A>
<A NAME="toc_fe78101_1"> </A></FONT> <FONT SIZE=2><B><BR>  Smith Electric Vehicles Corp.    <BR>    <BR>    COMBINED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED<BR>  DECEMBER 31, 2010, 2009 AND 2008,<BR>  CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
SIX MONTHS ENDED<BR>  JUNE 30, 2011 (UNAUDITED)<BR>  AND COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED<BR>  JUNE 30, 2010 (UNAUDITED)    <BR>    <BR>    (in thousands, except per share amounts)     <BR>    </B></FONT></P>
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<DIV ALIGN="CENTER"><TABLE width="110%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="84pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Years ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Six Months ended June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=5 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vehicle</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>23,827</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8,223</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14,166</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>31,930</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>9,633</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Service and repairs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>11,767</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14,631</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18,208</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,672</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,191</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>35,594</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>22,854</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>32,374</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>37,602</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15,824</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cost of revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vehicle</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33,117</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13,370</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>21,671</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>40,035</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12,335</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Service and repairs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12,175</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14,421</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18,124</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,945</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,165</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total cost of revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>45,292</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>27,791</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>39,795</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>45,980</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>18,500</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Gross loss</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9,698</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(4,937</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(7,421</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8,378</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2,676</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development expense</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
2,550</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
1,126</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
9,478</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
1,457</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2><BR>
830</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Selling, general and administrative</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13,307</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10,697</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,411</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,031</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,360</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total operating expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15,857</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>11,823</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14,889</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8,488</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,190</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Operating loss</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
(25,555</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
(16,760</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
(22,310</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
(16,866</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
(7,866</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other expense (income):</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,699</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>696</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,881</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,225</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Government grant reimbursements</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(688</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(18</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(205</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(315</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Loss on extinguishment of debt</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>971</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other expense, net</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,698</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>60</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,763</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>745</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss before taxes</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(30,264</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(17,498</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(22,310</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(21,276</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9,521</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=5 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Provision (benefit) for income taxes</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(30,264</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(17,498</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(22,310</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(21,276</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9,521</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss per common share (basic and diluted)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
(2.95</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
(1.89</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Not applicable<BR>
(Note&nbsp;2)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
$(2.05)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
$(0.94)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=5 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-top:12pt;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Weighted-average common shares outstanding (basic and diluted)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
10,258</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
9,271</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
Not applicable<BR>
(Note&nbsp;2)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
10,381</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2><BR>
10,133</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>See
accompanying notes to combined and consolidated financial statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-5</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=175,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=324980,FOLIO='F-5',FILE='DISK126:[11ZDO1.11ZDO78101]FE78101A.;15',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
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NAME="page_fg78101_1_6"> </A>


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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fg78101_smith_electric_vehicles_corp.___smi01204"> </A>
<A NAME="toc_fg78101_1"> </A></FONT> <FONT SIZE=2><B><BR>  Smith Electric Vehicles Corp.    <BR>    <BR>    COMBINED STATEMENTS OF COMPREHENSIVE LOSS FOR THE YEARS ENDED<BR>  DECEMBER&nbsp;31, 2010, 2009 AND 2008,<BR>  CONSOLIDATED STATEMENT OF
COMPREHENSIVE LOSS FOR THE SIX MONTHS ENDED<BR>  JUNE&nbsp;30, 2011 (UNAUDITED)<BR>  AND COMBINED STATEMENT OF COMPREHENSIVE LOSS FOR THE SIX MONTHS ENDED<BR>  JUNE&nbsp;30, 2010 (UNAUDITED)    <BR>    <BR>    (in thousands)     <BR>
</B></FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Years ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Six Months ended June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(30,264</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(17,498</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(22,310</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(21,276</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9,521</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other comprehensive income (loss), net of tax:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Foreign currency translation adjustments</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>315</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(12</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2,614</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(229</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>492</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Comprehensive loss</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(29,949</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(17,510</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(24,924</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(21,505</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9,029</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>See
accompanying notes to combined and consolidated financial statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-6</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=176,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=98488,FOLIO='F-6',FILE='DISK126:[11ZDO1.11ZDO78101]FG78101A.;7',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->

<P style="font-family:times;"><FONT SIZE=2><A
NAME="page_fi78101_1_7"> </A>


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</FONT> <FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<!-- COMMAND=ROTATED_TABLE WIDTH="150%" -->

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="STOCKHOLDERS_DEFICIT"></A></FONT><FONT SIZE=2><B>Smith Electric Vehicles Corp.  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008 AND<BR>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT FOR THE SIX MONTHS ENDED JUNE&nbsp;30, 2011 (UNAUDITED)  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (in thousands, except share amounts)  </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:54%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=1>


<!-- COMMAND=ADD_TABLEWIDTH,"150%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="150%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="8pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="34pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="72pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="60pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="60pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="73pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Common Stock </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=3 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=3 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Accumulated<BR>
Other<BR>
Comprehensive<BR>
Income (Loss) </B></FONT></TH>
<TH ROWSPAN=3 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=3 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Equity<BR>
Capital<BR>
Deficiency of<BR>
Tanfield </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Additional<BR>
Paid-in<BR>
Capital </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Common<BR>
Stock<BR>
Warrant </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Accumulated<BR>
Deficit </B></FONT></TH>
<TH ROWSPAN=2 style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ROWSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total<BR>
Stockholders'<BR>
Equity (Deficit) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Shares </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Amount </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Balance at December&nbsp;31, 2007</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>27,447</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>27,447</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Comprehensive loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(2,614</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(22,310</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(24,924</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Balance at December&nbsp;31, 2008</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(2,614</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>5,137</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>2,523</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Comprehensive loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(12</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(8,676</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(8,822</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(17,510</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Common shares issued at inception of Smith US (Note&nbsp;1 and 15)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>8,999</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>9</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>518</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>37</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>564</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Common shares issued for cash</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>695</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>336</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>337</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Forfeiture of shares (Note&nbsp;15)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(1,999</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Share-based compensation (Note&nbsp;15)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,999</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,465</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,467</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Balance at December&nbsp;31, 2009</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>9,694</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>10</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>2,319</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>37</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(2,626</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(3,539</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(8,822</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(12,621</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Comprehensive loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>315</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(4,831</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(25,433</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(29,949</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Warrant exercise</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>640</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>20</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(14</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>6</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Common shares issued for cash</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>47</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>37</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>37</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Share-based compensation</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>96</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>96</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Balance at December&nbsp;31, 2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>10,381</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>10</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>2,472</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>23</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(2,311</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(8,370</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(34,255</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(42,431</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Acquisition of Smith UK (Note&nbsp;1 and 15):</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Net distribution to Tanfield</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(10,282</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(10,282</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Capital deficiency assumed</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>18,652</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(18,652</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Comprehensive loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(229</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(21,276</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(21,505</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Share-based compensation</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>127</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>525</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>526</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Balance at June&nbsp;30, 2011 (Unaudited)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>10,508</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>11</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>2,997</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>23</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(2,540</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(74,183</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(73,692</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>See accompanying notes to combined and consolidated financial statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-7</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=177,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=480254,FOLIO='F-7',FILE='DISK126:[11ZDO1.11ZDO78101]FI78101A.;10',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
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<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fk78101_smith_electric_vehicles_corp.___smi00127"> </A>
<A NAME="toc_fk78101_1"> </A></FONT> <FONT SIZE=2><B><BR>  Smith Electric Vehicles Corp.    <BR>    <BR>    COMBINED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED<BR>  DECEMBER&nbsp;31, 2010, 2009 AND 2008,<BR>  CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED<BR>  JUNE&nbsp;30, 2011 (UNAUDITED)<BR>  AND COMBINED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED<BR>  JUNE&nbsp;30, 2010 (UNAUDITED)    <BR>    <BR>    (in thousands)     <BR>    </B></FONT></P>
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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="8pt" style="font-family:times;"></TD>
<TD WIDTH="8pt" style="font-family:times;"></TD>
<TD WIDTH="8pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="41pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="41pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="41pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="41pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="6pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="36pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Years ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Six Months ended<BR>
June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=4 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1><B>OPERATING ACTIVITIES</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(30,264</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(17,498</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(22,310</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(21,276</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(9,521</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Adjustments for non-cash items included in net loss:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Depreciation and amortization</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,123</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>842</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>827</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>743</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>480</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Amortization of deferred financing costs</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>440</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>39</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>183</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>110</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Non-cash services provided at formation of Smith US</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>207</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Change in fair value of derivative financial instruments</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,699</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>61</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,687</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>745</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Accretion of debt discount</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,312</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>121</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>547</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>383</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Inventory impairment charges</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>4,587</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>4,392</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>5,887</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>3,695</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>2,891</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Warranty charges</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>2,139</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>4,597</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,409</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>2,703</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>614</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Interest expense&#151;payable in kind</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,939</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>390</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>932</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>727</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Loss on extinguishment of debt</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>971</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Share-based compensation</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>96</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,465</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>526</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>65</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Other</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>305</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>151</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>179</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>40</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Changes in assets and liabilities:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Trade accounts receivable</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(710</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>512</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>2,639</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(4,245</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(2,606</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Inventories</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(16,102</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(5,437</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(11,304</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(488</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(4,942</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Other current assets</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(81</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(938</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(127</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(769</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>22</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Accounts payable</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>12,015</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(14</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(4,225</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(139</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>3,989</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Deferred revenue</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>6,120</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(346</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(315</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(6,662</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,132</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Other liabilities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>3,108</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(1,117</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>934</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(921</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>91</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Net cash used in operating activities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(12,274</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(12,573</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(26,406</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(22,473</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(5,820</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1><B>INVESTING ACTIVITIES</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Additions to property, plant and equipment</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(1,662</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(804</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(524</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(1,707</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(812</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Net cash used in investing activities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(1,662</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(804</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(524</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(1,707</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(812</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1><B>FINANCING ACTIVITIES</B></FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Proceeds from issuance of Series&nbsp;A convertible debentures and conversion option (Note&nbsp;9)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>663</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>10,088</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>663</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Proceeds from issuance of bridge notes and related warrants, net of acceleration feature (Note&nbsp;9)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>14,150</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>5,650</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Proceeds from issuance of common stock</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>43</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>337</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>43</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Proceeds from issuance of convertible redeemable preferred stock, net of commissions</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>37,787</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Payments on note payable&#151;Tanfield</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(6,500</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Advances from (payments to) Tanfield, net</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(269</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>4,298</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>27,402</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(303</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Deferred financing costs</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(874</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(389</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(336</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Deferred offering costs</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(756</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Other</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(34</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(80</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(163</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(182</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(30</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Net cash provided by financing activities</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>13,679</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>14,254</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>27,239</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>30,349</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>5,687</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Effect of exchange rate changes on cash</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>74</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>26</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(43</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>58</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>109</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Net (decrease) increase in cash and cash equivalents</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(183</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>903</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>266</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>6,227</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>(836</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Cash and cash equivalents, beginning of year</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,183</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>280</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>14</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,183</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=4 style="font-family:times;"><p style="font-family:times;margin-left:8pt;text-indent:-8pt;"><FONT SIZE=1> </FONT><FONT SIZE=1>Cash and cash equivalents, end of year</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>1,183</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>280</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>7,227</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=1>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=1>347</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=4 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>
See accompanying notes to combined and consolidated financial statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-8</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=178,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=992413,FOLIO='F-8',FILE='DISK126:[11ZDO1.11ZDO78101]FK78101A.;12',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fm78101_smith_electric_vehicles_corp.___smi03077"> </A>
<A NAME="toc_fm78101_1"> </A></FONT> <FONT SIZE=2><B><BR>  Smith Electric Vehicles Corp.    <BR>    <BR>    SUPPLEMENTAL CASH FLOW INFORMATION    <BR>    <BR>    (in thousands)     <BR>    </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Years ended<BR>
December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Six Months ended<BR>
June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash paid for income taxes</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cash paid for interest</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Non-cash investing and financing activities:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Property, plant and equipment accrued in accounts payable</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>177</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>58</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>77</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>108</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Property, plant and equipment financed&#151;capital lease</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>11</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>64</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accrued deferred financing costs</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>132</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>76</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deferred offering costs accrued in accounts payable</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,291</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Intangible assets acquired upon formation of Smith US (Note&nbsp;1 and 15)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>355</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Conversion of bridge notes and warrants to convertible redeemable preferred stock</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>18,901</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Acquisition of Smith UK (Note&nbsp;1 and 15)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10,282</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>See
accompanying notes to combined and consolidated financial statements. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-9</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=179,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=884023,FOLIO='F-9',FILE='DISK126:[11ZDO1.11ZDO78101]FM78101A.;6',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->

<P style="font-family:times;"><FONT SIZE=2><A
NAME="page_fo78101_1_10"> </A>


<!-- COMMAND=ADD_BASECOLOR,"Black" -->




<!-- COMMAND=ADD_DEFAULTFONT,"font-family:times;" -->




<!-- COMMAND=ADD_TABLESHADECOLOR,"#CCEEFF" -->




<!-- COMMAND=ADD_STABLERULES,"border-bottom:solid #000000 1.0pt;" -->




<!-- COMMAND=ADD_DTABLERULES,"border-bottom:double #000000 2.25pt;" -->




<!-- COMMAND=ADD_SCRTABLERULES,"border-bottom:solid #000000 1.0pt;margin-bottom:0pt;" -->




<!-- COMMAND=ADD_DCRTABLERULES,"border-bottom:double #000000 2.25pt;margin-bottom:0pt;" -->


 </FONT></P>

<!-- TOC_END -->

<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fo78101_smith_electric_vehicles_corp.___smi07993"> </A>
<A NAME="toc_fo78101_1"> </A></FONT> <FONT SIZE=2><B><BR>  Smith Electric Vehicles Corp.    <BR>    <BR>    NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS    <BR>    <BR>    (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED
DECEMBER&nbsp;31,&nbsp;2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30,&nbsp;2011 AND FOR THE  SIX MONTHS ENDED JUNE&nbsp;30,&nbsp;2011 AND 2010 IS&nbsp;UNAUDITED.)    <BR>    </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (1) Nature of Business and Presentation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The accompanying combined and consolidated financial statements include the accounts of Smith Electric Vehicles Corp. ("Smith&nbsp;US") a partially owned subsidiary of The Tanfield
Group&nbsp;Plc, ("Tanfield") and two related companies, SEV Group&nbsp;Ltd. and Saxon Specialist Electric Vehicles, a wholly owned subsidiary and division, respectively (collectively,
"Smith&nbsp;UK") of Tanfield prior to January&nbsp;1, 2011. From the inception of Smith&nbsp;US in January 2009 through December&nbsp;31, 2010, these companies were under common ownership and
control. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith&nbsp;US,
located in Kansas City, Missouri, was incorporated in Delaware on January&nbsp;13, 2009, and is engaged in the development, manufacture, sale and servicing of
all-electric, zero-emission commercial trucks in the United States and Canada. At inception, the Company issued 8,999,089 shares of its common stock to certain individuals and
an entity for services rendered in connection with our founding and to Tanfield in consideration of a license agreement (the "License Agreement"). The general terms of the License Agreement were
agreed to prior to the issuance of the shares in January 2009 and the License Agreement was executed in August 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith&nbsp;UK
designs, manufactures, sells and services all-electric, zero-emission commercial trucks in the United Kingdom and other international markets.
Smith&nbsp;UK also provides maintenance services for diesel-fueled vehicle fleets and sells and leases forklifts for warehouse use. Upon formation of Smith&nbsp;US, the knowledge,
technology and brand of Smith Electric Vehicles was licensed to Smith&nbsp;US by Tanfield for exclusive use in North America, in perpetuity. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective
January&nbsp;1, 2011, Smith&nbsp;US acquired certain of the assets and liabilities of Smith&nbsp;UK, including the Smith brand, Smith&nbsp;UK's
zero-emission vehicle know-how and technology, the License Agreement, and Smith&nbsp;UK's maintenance division from Tanfield. These assets and liabilities were acquired by a
newly formed entity, Smith Electric Vehicles Europe Limited ("Smith Europe"). Smith Europe is a wholly-owned subsidiary of Smith&nbsp;US. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
acquisition of certain of the assets and liabilities of Smith&nbsp;UK by Smith US represented a combination of entities under the common control and is accounted for in a manner
similar to the pooling-of-interest method and the historical financial statements of Smith&nbsp;US and Smith&nbsp;UK have been combined, retrospectively, as if the
transaction had occurred on January&nbsp;13, 2009, Smith&nbsp;US's date of incorporation. The financial statements of Smith&nbsp;UK have been generated to present the historical financial
position, results of operations and cash flows of Tanfield's vehicle maintenance and electric vehicles businesses. Because Smith&nbsp;UK was the entity first owned by the controlling shareholder,
Smith&nbsp;UK has been presented as the historical predecessor entity prior to the formation of Smith&nbsp;US. As of and for the periods prior to December&nbsp;31, 2010, the financial statements
of Smith&nbsp;US and Smith&nbsp;UK are presented on a combined basis and significant intercompany transactions have been eliminated. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of and for periods subsequent to January&nbsp;1, 2011, the financial statements of Smith&nbsp;US and Smith Europe are presented on a consolidated basis. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
unaudited financial information for the six months ended June&nbsp;30, 2011 and 2010 reflects all adjustments that are, in the opinion of management, necessary to present fairly
our results of </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-10</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31,&nbsp;2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30,&nbsp;2011 AND FOR THE
SIX MONTHS ENDED JUNE&nbsp;30,&nbsp;2011 AND 2010 IS&nbsp;UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (1) Nature of Business and Presentation (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>operations,
financial position, and cash flows for the periods presented. The adjustments consist solely of normal recurring adjustments. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Terms
such as the "Company", "Smith", "us", "we", and "ours" refer to the combination of Smith&nbsp;US and Smith&nbsp;UK for periods as of and prior to December&nbsp;31, 2010 and
refer to the consolidated entity Smith Electric Vehicles Corp., which includes Smith Europe, for periods as of and subsequent to January&nbsp;1, 2011. The Company's fiscal year end is
December&nbsp;31. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Going Concern and Management Plans  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The combined and consolidated financial statements contemplate the realization of assets and the settlement of liabilities and
commitments in the normal course of business. On a combined basis, we incurred a net loss of $70.1&nbsp;million for the three year period ended December&nbsp;31, 2010, and, on a consolidated
basis, we incurred a net loss of $21.3&nbsp;million for the six month period ended June&nbsp;30, 2011. As of December&nbsp;31, 2010 and June&nbsp;30, 2011, we had a working capital deficit of
$29.3&nbsp;million and $2.9&nbsp;million, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management
has developed an operating plan for the remainder of fiscal year 2011 and for fiscal year 2012 and believes that we will be able to obtain additional financial resources to
achieve our plan and to sustain operations through the end of fiscal year 2012. Nevertheless, management will be monitoring the plan closely throughout this period and should the plan objectives not
be met during the year, remedial actions will be initiated. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
March 2011, we issued Series&nbsp;B convertible redeemable preferred stock in return for net cash proceeds of $37.8&nbsp;million. At that time, our bridge note holders elected
to convert substantially all of their bridge note principal and accrued interest into Series&nbsp;B convertible redeemable preferred stock. See Note&nbsp;9, "Convertible Debt and Convertible
Redeemable Preferred Stock", for additional information. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning
in August 2011, we transitioned the U.S.&nbsp;produced Smith Newton vehicle to our Smith Power and Smith Drive technologies and we temporarily suspended vehicle production at
our Kansas City, Missouri facility in order to facilitate this transition. We began production of our second generation Newton, which includes our Smith Drive, Smith Power and Smith Link technologies,
in November 2011. We anticipate that our Smith Power, Smith Drive and Smith Link technologies will result in significantly reduced costs and will enable us, over time, to reduce our losses or to
become profitable. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
September 2011, we issued a senior unsecured promissory note for cash proceeds of $2.8&nbsp;million. During October 2011, we issued senior unsecured convertible promissory notes
for aggregate cash proceeds of $25.2&nbsp;million and the discharge of the indebtedness under the senior unsecured promissory note issued in September 2011. However, we will need to obtain
additional capital in order to continue to fund operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management
cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. These factors
raise substantial </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-11</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31,&nbsp;2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30,&nbsp;2011 AND FOR THE
SIX MONTHS ENDED JUNE&nbsp;30,&nbsp;2011 AND 2010 IS&nbsp;UNAUDITED.) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (1) Nature of Business and Presentation (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>doubt
about our ability to continue as a going concern. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should we be unable to continue as a going concern. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (2) Summary of Significant Accounting Policies  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash and Cash Equivalents</I></B></FONT><FONT SIZE=2>&#151;Cash and cash equivalents are stated at cost, which, due to their short-term nature, approximates fair value.
All highly liquid investments with an original or remaining maturity of three months or less at the date of purchase are considered to be cash equivalents. Cash and cash equivalents are maintained
with financial institutions and the amount on deposit may exceed the amount of insurance provided on such deposits. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts Receivable</I></B></FONT><FONT SIZE=2>&#151;We generally grant uncollateralized credit to our customers. Accounts receivable are stated net of an allowance for
uncollectible
amounts, which is determined by establishing reserves for specific accounts and consideration of historical and estimated probable losses. Uncollectible accounts are written-off against
the allowance for doubtful accounts after collection efforts have been exhausted. We recognized bad debt expense of approximately $249,000, $70,000, and $255,000 during the years ended
December&nbsp;31, 2010, 2009 and 2008, respectively. We did not recognize bad debt expense during the six months ended June&nbsp;30, 2011 or 2010. The allowance for doubtful accounts was
approximately $224,000 and $105,000, respectively, at December&nbsp;31, 2010 and 2009, and $70,000 at June&nbsp;30, 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other Receivables</I></B></FONT><FONT SIZE=2>&#151;Other receivables are comprised primarily of balances receivable from certain of our vendors for additional service action costs,
 as
described further in Note&nbsp;13, "Commitment and Contingencies." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Use of Estimates</I></B></FONT><FONT SIZE=2>&#151;The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of
America, using management's estimates and judgments where appropriate. These estimates and judgments affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates and
judgments. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Concentrations of Risks</I></B></FONT><FONT SIZE=2>&#151;We have risks related to market concentration, customer concentration, credit risk concentration, and source of supply
concentration. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have two operating segments, Zero Emission Vehicles and Maintenance Services. We have made a strategic decision to focus our resources on developing our Zero Emission Vehicles
business. As a result, external revenue for the Zero Emission Vehicles segment as a percentage of total revenue has increased from 22% for the year ended December&nbsp;31, 2009 to 61% for the year
ended December&nbsp;31, 2010 and to 82% for the six months ended June&nbsp;30, 2011. As a result, we are vulnerable to any disruptions to the zero emission vehicle market, including any reduction
in government subsidies related to all-electric vehicles. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-12</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31,&nbsp;2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30,&nbsp;2011 AND FOR THE
SIX MONTHS ENDED JUNE&nbsp;30,&nbsp;2011 AND 2010 IS&nbsp;UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (2) Summary of Significant Accounting Policies (Continued) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
market for our vehicles and services primarily consists of commercial medium duty truck fleet managers in the United States and the United Kingdom. As a result, we have a limited
number of existing and potential customers. For the six months ended June&nbsp;30, 2011 and the years ended December&nbsp;31, 2010, 2009, and 2008, four significant customers represented 71%, 47%,
49%, and 41% of our revenue, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
credit risk concentration is related to our customer concentration risk as a limited number of customers generate a significant portion of our accounts receivable. As of
June&nbsp;30, 2011, December&nbsp;31, 2010, and December&nbsp;31, 2009, our four largest customers accounted for 37%, 40%, and 20%, respectively, of our total accounts receivable. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
are a limited number of qualified suppliers for the key components for our electric vehicles, and we generally source these key components from a single supplier. If a key supplier
is unable to provide us with high quality parts on a timely basis, our production process may be interrupted and we may be unable to deliver vehicles on schedule, which could have a material adverse
effect on our results of operations, financial position and cash flows. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories</I></B></FONT><FONT SIZE=2>&#151;Inventories are valued at the lower of cost or market. Cost is determined on a first-in, first-out (FIFO) basis
and includes material costs, inbound freight, labor and applicable overhead. We record inventory write-downs based on reviews for obsolescence determined primarily by historical usage and
future demand forecasts. We also adjust the carrying value of our inventories when we believe that the net realizable value is less than the carrying value. These write-downs are measured
as the difference between the cost of the inventory, including estimated costs to complete, and estimated net realizable selling prices. Once inventory is written down, a new, lower-cost
basis for that inventory is established. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred Financing Costs</I></B></FONT><FONT SIZE=2>&#151;Deferred financing costs consist of third party fees incurred to obtain debt financing. Deferred financing costs are
capitalized and amortized to interest expense using the effective-interest method over the estimated life of the related debt. Deferred financing costs are included as a component of other
current assets and other long-term assets on the accompanying combined and consolidated balance sheets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property, Plant and Equipment</I></B></FONT><FONT SIZE=2>&#151;Capital additions and improvements are classified as property, plant and equipment and are recorded at cost.
Maintenance
and repair expenditures are expensed as incurred, while major improvements that extend the life or increase the functionality of the asset are capitalized as additions to property, plant and
equipment. Depreciation is calculated for financial statement purposes using the straight-line method over the estimated useful life or, for leasehold improvements, the term of the related
lease if shorter than the estimated useful life. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-13</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31,&nbsp;2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30,&nbsp;2011 AND FOR THE
SIX MONTHS ENDED JUNE&nbsp;30,&nbsp;2011 AND 2010 IS&nbsp;UNAUDITED.) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (2) Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
current range of estimated useful lives of the following types of assets is as follows: </FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR><!-- TABLE COLUMN WIDTHS SET -->
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<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of Years </B></FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Leased forklifts</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5&nbsp;-&nbsp;10</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Machinery and equipment</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1&nbsp;-&nbsp;10</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Furniture, fixtures and equipment</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3&nbsp;-&nbsp;5</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Property, buildings and leasehold improvements</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1&nbsp;-&nbsp;10</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vehicles</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3&nbsp;-&nbsp;5</FONT></TD>
</TR>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income Taxes</I></B></FONT><FONT SIZE=2>&#151;Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are
recognized for the anticipated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis,
and for tax losses and credit carry-forwards. Deferred amounts are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Valuation allowances are established when, based upon available evidence, it is more likely than not that some or all of the deferred tax assets will not be
realized. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit.
For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than
50&nbsp;percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Accrued interest and penalties related to unrecognized tax benefits are classified as income
tax expense. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Impairment of Long-Lived Assets</I></B></FONT><FONT SIZE=2>&#151;We review long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated
undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future net cash flows, an impairment charge is
recognized for the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of their carrying value or fair value less cost to sell.
No impairment charges were recognized during the periods presented. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue Recognition</I></B></FONT><FONT SIZE=2>&#151;We recognize revenue when: (i)&nbsp;persuasive evidence of an arrangement exists; (ii)&nbsp;delivery has occurred or services
have been rendered and there are no uncertainties regarding customer acceptance; (iii)&nbsp;our price is fixed or determinable; and (iv)&nbsp;collection is reasonably assured. In instances where
customer acceptance is required, revenue is either recognized (a)&nbsp;upon shipment when we are able to demonstrate that the customer specific objective criteria have been met or (b)&nbsp;upon
the earlier of customer acceptance or expiration of the acceptance period. Payments received in advance of work performed are recorded as deferred revenue. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-14</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31,&nbsp;2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30,&nbsp;2011 AND FOR THE
SIX MONTHS ENDED JUNE&nbsp;30,&nbsp;2011 AND 2010 IS&nbsp;UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (2) Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
examine sales contracts to determine whether the contract contains multiple elements and, if so, to determine if separate units of accounting exist within the arrangement. As of
December&nbsp;31, 2010, we have determined that all sales arrangements should be accounted for as a single unit of accounting. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith&nbsp;UK
and Smith Europe sell and lease forklifts. At inception of a lease contract, the customer will pay Smith&nbsp;UK or Smith Europe the full value of the forklift. The
full value of payments received for leased forklifts was approximately $151,000 and $107,000 in 2010 and 2008, respectively. We did not receive any such payments during 2009. At the end of a specified
period, generally five years, the customer is contractually obligated to return the forklift to us and we must pay the customer a residual value that was determined at the inception of the contract.
The up-front payment received by Smith&nbsp;UK or Smith Europe from the customer is initially recorded as deferred revenue and subsequently recognized as vehicle revenue on a
straight-line basis, net of expected guaranteed repurchase payments, over the life of the contract. Deferred revenue expected to be recognized as revenue more than one year subsequent to
the balance sheet date is classified as long-term deferred revenue and included within other long-term liabilities in the combined balance sheets. As of December&nbsp;31,
2010 and 2009 and June&nbsp;30, 2011, we had deferred revenue related to the leasing of forklifts of $836,000, $1.2&nbsp;million and $557,000, respectively, of which $573,000, $798,000 and
$129,000, respectively, was classified as long-term. We recognize
the forklifts as a component of property, plant and equipment throughout the contract term and depreciate the forklifts on a straight-line basis, net of salvage value, over the life of the
contract. The residual value of the leased forklifts was $487,000 and $365,000 at December&nbsp;31, 2010 and June&nbsp;30, 2011, respectively. The recognized depreciation expense is included as a
component of cost of revenue in the combined statements of operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign Currency Remeasurement and Transactions</I></B></FONT><FONT SIZE=2>&#151;The functional currency for Smith&nbsp;UK and Smith Europe is the British Pound. Smith&nbsp;UK and
Smith Europe's assets and liabilities are translated at the period-end exchange rate and revenues and expenses are translated at the average exchange rates for the period. The resulting
gains or losses are recognized as a component of accumulated other comprehensive loss on the combined and consolidated balance sheets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Foreign
currency transaction gains and losses result from the effect of exchange rate changes on transactions denominated in currencies other than the functional currency. We purchase
various inventory consumables and consulting services from foreign manufacturers that are settled in a currency other than the functional currency. Foreign currency gains and losses resulting from
foreign currency transactions are recognized in the period incurred and are included as a component of other expense, net in the combined statements of operations. Recognized net foreign currency
transaction (gains) losses are reflected in the combined and consolidated statements of operations and amounted to $12,000, $201,000 and $127,000 for the years ended December&nbsp;31, 2010, 2009 and
2008, respectively, and $174,000 and $(1,000) during the six months ended June&nbsp;30, 2011 and 2010, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Fair Value of Financial Instruments</I></B></FONT><FONT SIZE=2>&#151;We have issued financial instruments that either contain embedded conversion or acceleration options or
include
detachable warrants. At the date we issue the financial instrument we measure and recognize as an asset or liability the fair value of these financial instruments. Changes in the fair value of these
financial instruments in subsequent periods are </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-15</FONT></P>

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HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31,&nbsp;2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30,&nbsp;2011 AND FOR THE
SIX MONTHS ENDED JUNE&nbsp;30,&nbsp;2011 AND 2010 IS&nbsp;UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (2) Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>recognized
as a component of our net loss and the carrying value of the asset or liability is adjusted accordingly. Fair value is defined as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Under applicable accounting guidance, a fair value hierarchy is
based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, that may be used to measure fair value: </FONT></P>

<UL>

<P style="font-family:times;"><FONT SIZE=2>Level&nbsp;1&#151;Quoted
prices in active markets for identical assets or liabilities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Level&nbsp;2&#151;Inputs
other than Level&nbsp;1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>Level&nbsp;3&#151;Unobservable
inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. </FONT></P>

</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
have financial instruments, consisting of a Series&nbsp;A conversion option liability, a bridge note acceleration option asset, and a bridge note detachable warrant, that are valued
based on Level&nbsp;3 unobservable inputs that are supported by little or no market activity. As further described in Note&nbsp;3, "Fair Value of Financial Instruments," our measurement of fair
value are based on binomial and discounted cash flow models, which require significant management assumptions and estimates. Key inputs, which are described for each instrument in Note&nbsp;9,
"Convertible Debt and Convertible Redeemable Preferred Stock", for the various models used were probability and timing of the conversion, exercise, or acceleration event, enterprise value, volatility,
the risk-free interest rate, the risk-adjusted interest rate, and the anticipated dividend rate. The recognized loss for change in fair value for these instruments, in the
aggregate, was $1.7&nbsp;million for both the six months ended June&nbsp;30, 2011 and the year ended December&nbsp;31, 2010 and is included as a component of other expense, net. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Government Grant Reimbursements</I></B></FONT><FONT SIZE=2>&#151;In August 2009, the U.S.&nbsp;Department of Energy ("DOE") awarded Smith&nbsp;US a $10.0&nbsp;million grant,
which was increased to $32.0&nbsp;million in April 2010. The $32.0&nbsp;million grant is comprised of (i)&nbsp;$4.0&nbsp;million for new vehicle development, which is reimbursed at a rate of
approximately 33% of qualified research and development expenditures, and (ii)&nbsp;$28.0&nbsp;million to incentivize fleet customers to participate in an Electronic Vehicle ("EV") demonstration
program that will provide the DOE with certain performance data. We act as an intermediary between the DOE and the fleet customer and do not recognize revenues or costs related to this portion of the
DOE grant. If we do not comply with certain requirements, the DOE could terminate the EV Demonstration Project and we and our customers would lose access to any remaining funding available under the
grant. As of both June&nbsp;30, 2011 and December&nbsp;31, 2010, under the new vehicle development grant approximately $3.5&nbsp;million was available if we incur sufficient qualifying
expenditures. As of June&nbsp;30, 2011 and December&nbsp;31, 2010, under the EV demonstration program there were approximately </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-16</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31,&nbsp;2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30,&nbsp;2011 AND FOR THE
SIX MONTHS ENDED JUNE&nbsp;30,&nbsp;2011 AND 2010 IS&nbsp;UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (2) Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>$15.1&nbsp;million
and $21.8&nbsp;million, respectively, of funds available to customers for participation in the demonstration program. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reimbursements
of qualified research and development expenditures received pursuant to the new vehicle development grant are recognized as a component of government grant reimbursements
in the combined and consolidated statements of operations and reimbursements related to the qualified capital expenditures are recorded as a reduction to the capitalized basis of the related asset.
During 2010, reimbursements received under this grant included research and development costs of approximately $460,000 and plant and equipment investments of approximately $96,000. We did not receive
any reimbursements under this grant during the six months ended June&nbsp;30, 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
customers elect to participate in the EV demonstration program for either a two or three year term, and are eligible to receive an incentive amount based on the term of their
participation. During 2010, the DOE distributed approximately $6.2&nbsp;million of customer incentive payments. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2009, we qualified for participation in certain research programs under the United Kingdom's national innovation agency programs sponsored by the U.K. Department for Business,
Innovation and Skills. Under these programs, we are eligible to receive approximately $1.3&nbsp;million in aggregate reimbursements. Through June&nbsp;30, 2011, we have qualified for
reimbursements totaling approximately $0.4&nbsp;million, which have been recognized as a component of government grant reimbursements in the combined and consolidated statements of operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Start-up Costs</I></B></FONT><FONT SIZE=2>&#151;Costs associated with start-up activities are expensed as incurred. Start-up costs of approximately
$3.2&nbsp;million associated with the formation of Smith&nbsp;US have been included in selling, general and administrative expenses within the combined statements of operations for the year ended
December&nbsp;31, 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Research and Development Costs</I></B></FONT><FONT SIZE=2>&#151;Costs incurred in the research and development of our products are expensed as incurred and include salaries,
third-party contractors, materials and supplies. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warranty</I></B></FONT><FONT SIZE=2>&#151;We provide a warranty on all vehicles we sell that, depending on the component, extends for a period of one to seven years. Currently, we
do
not offer a fee based extended warranty plan. At the date of vehicle sale, we recognize expense and accrue the related liability for estimated future expenditures related to warranty service actions.
Warranty reserves include management's estimate of the future costs to repair or to replace any items under warranty, based on actual warranty experience as it becomes available and other known
factors that may impact our evaluation of historical data. In addition, at each period end, the number and magnitude of additional service actions expected to be approved and actual additional service
actions are taken into consideration in our assumptions to ensure that the warranty reserve balance is adequate to meet future expected obligations. When collection is reasonably assured, we also
estimate and recognize the
amount of warranty claim recoveries to be received from our suppliers. Due to the uncertainty and potential volatility of these estimated factors, future experience may result in changes in our
assumptions and could materially affect net income. See Note&nbsp;13, "Commitments and Contingencies" for more information regarding costs and assumptions for warranties and additional service
actions. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-17</FONT></P>

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HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31,&nbsp;2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30,&nbsp;2011 AND FOR THE
SIX MONTHS ENDED JUNE&nbsp;30,&nbsp;2011 AND 2010 IS&nbsp;UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (2) Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Share-Based Compensation</I></B></FONT><FONT SIZE=2>&#151;Share-based compensation expense is recognized in the combined statements of operations based on the
fair value of the awards. In connection with the formation of Smith&nbsp;US, two employees received approximately 1.8&nbsp;million shares of Smith&nbsp;US common stock. As there were no
performance or service conditions related to these shares, the approximate $146,000 fair value of these shares was immediately recognized as compensation expense. Our Chairman of the Board at
December&nbsp;31, 2009 was awarded approximately 2.0&nbsp;million shares of Smith common stock upon his appointment as Chairman in December 2009. As there were no performance or service conditions
related to these shares, the approximate $1.5&nbsp;million fair value of these shares was immediately recognized as compensation expense in 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
fair value of stock options is calculated using the Black-Scholes option valuation model. Expected volatility is based on the historical volatility of stocks of
comparable "clean energy" companies traded on an exchange. The expected terms of the options were calculated using the simplified method as we do not have sufficient historical exercise data. The risk
free interest rate is based on the U.S.&nbsp;Treasury rate at the time of the grant for instruments of a comparable life. Our valuation model assumes a zero dividend rate. Due to the limited number
of grants issued combined with the relatively short vesting periods of less than two years, we initially estimate that all awards will vest. Forfeitures of awards are recognized in subsequent periods
if actual forfeitures differ from those estimates. Compensation cost for each period is based on the percentage of the requisite service that has been rendered through the end of the period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shipping and Handling Costs</I></B></FONT><FONT SIZE=2>&#151;Shipping and handling costs incurred have been included in cost of revenue. Shipping and handling costs charged to
customers have been included in revenue. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accumulated Other Comprehensive Loss</I></B></FONT><FONT SIZE=2>&#151;Other comprehensive loss refers to revenue, expense, gains, and losses that are recorded as an element of
stockholders' deficit rather than as a component of net loss. Our other comprehensive loss consists primarily of foreign currency translation
adjustments related to Smith&nbsp;UK and Smith Europe, which use the British Pound as the functional currency. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net Loss Per Share of Common Share</I></B></FONT><FONT SIZE=2>&#151;Our basic net loss per common share is calculated by dividing the combined or consolidated net loss by the
weighted-average number of shares of Smith&nbsp;US common stock outstanding for the period. The diluted net loss per common share is computed by dividing the combined or consolidated net
loss using the weighted-average number of shares of Smith&nbsp;US common stock outstanding for the period and, if dilutive, potential common shares outstanding during the period. As
Smith&nbsp;US was not incorporated until January 2009, during 2008 there were no shares of Smith&nbsp;US common stock outstanding; accordingly, we did not calculate basic and diluted net loss per
common share for the year ended December&nbsp;31, 2008. Potential common shares consist of stock options to purchase common shares and warrants to purchase common shares and convertible securities.
When calculating incremental shares related to outstanding options and warrants, we apply the treasury stock method. The treasury stock method assumes that proceeds, consisting of the amount the
employee or other holder must pay on exercise, compensation cost attributed to future services and not yet recognized, and excess tax benefits that would be credited to additional paid-in
capital on exercise of the options or warrants, are used to repurchase outstanding </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-18</FONT></P>

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HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31,&nbsp;2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30,&nbsp;2011 AND FOR THE
SIX MONTHS ENDED JUNE&nbsp;30,&nbsp;2011 AND 2010 IS&nbsp;UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (2) Summary of Significant Accounting Policies (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>shares
at the average market price for the period. When calculating incremental convertible securities, we apply the if-converted method. The if-converted method assumes
conversion as of the beginning of the period and adds back to the numerator applicable interest charges and dividends. As we incurred losses during all periods presented, no potential common shares
were dilutive and, accordingly, our calculation included only weighted-average common shares outstanding for the period. As a result, 3.8&nbsp;million and 15.7&nbsp;million potential
common shares as of December&nbsp;31, 2010 and 2009, respectively, and 7.1&nbsp;million and 12.5&nbsp;million potential common shares as of June&nbsp;30, 2011 and 2010, respectively, were
excluded from the calculation of diluted net loss per common share as presented in our combined and consolidated statements of operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred Offering Costs</I></B></FONT><FONT SIZE=2>&#151;Costs directly associated with the preparation and filing of our registration statement related to our initial public
offering
of securities are capitalized and recorded as deferred offering costs. Upon completion of the proposed initial public offering, such costs will be recorded as a reduction of the proceeds received in
arriving at the amount to be recorded in stockholders' deficit. If the offering is not successful, the deferred offering costs will be expensed in the consolidated statement of operations. Deferred
offering costs capitalized as a component of other current assets on our consolidated balance sheet amounted to approximately $2.0&nbsp;million as of June&nbsp;30, 2011. We had not incurred
deferred offering costs as of or for the year ended December&nbsp;31, 2010. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> New Accounting Pronouncements  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May 2011, the Financial Accounting Standards Board updated the guidance regarding certain accounting and disclosure requirements
related to fair value measurements. The updated guidance amends U.S.&nbsp;Generally Accepted Accounting Principles ("GAAP") to create more commonality with International Financial Reporting
Standards by changing some of the wording used to describe requirements for measuring fair value and for disclosing information about fair value measurements. This update is effective for fiscal
years, and interim periods within those years, beginning after December&nbsp;15, 2011. Early adoption is not permitted. We do not expect the adoption of this update to have a material impact on our
financial position, results of operations or cash flows. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (3) Fair Value of Financial Instruments  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The carrying values of cash and cash equivalents, accounts receivable, other receivables, and accounts payable approximate fair value. Estimation of the fair value of our convertible
debt was not practicable as we were unable to obtain trading information on similar instruments due to the nature of the Series&nbsp;A Debentures and Bridge Notes. As a basis for determining the
fair value of certain assets and liabilities, we follow a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: (Level&nbsp;I) observable
inputs such as quoted prices in active markets; (Level&nbsp;II) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level&nbsp;III)
unobservable inputs in which there is little or no market data which requires us to develop our own assumptions. This hierarchy requires us to use observable market data, when available, and to
minimize the use of unobservable inputs when determining fair value. The only asset measured at fair value on a recurring basis is the Bridge Note Acceleration Option. Liabilities </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-19</FONT></P>

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HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31,&nbsp;2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30,&nbsp;2011 AND FOR THE
SIX MONTHS ENDED JUNE&nbsp;30,&nbsp;2011 AND 2010 IS&nbsp;UNAUDITED.) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (3) Fair Value of Financial Instruments (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>measured
at fair value on a recurring basis are the Series&nbsp;A Conversion Option and the Bridge Note Detachable Warrants. See Note&nbsp;9, "Convertible Debt and Convertible Redeemable Preferred
Stock" for
additional information regarding the Bridge Note Acceleration Option, the Series&nbsp;A Conversion Option and the Bridge Note Detachable Warrants. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following
is a summary of our financial assets and liabilities measured at fair value on a recurring basis (in thousands): </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> Fair Value at June&nbsp;30, 2011 (Unaudited)  </B></FONT></P>
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<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="35pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="42pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Fair Value </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Level&nbsp;I </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Level&nbsp;II </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Level&nbsp;III </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Liabilities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;A conversion option</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,052</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,052</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> Fair Value at December&nbsp;31, 2010  </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="49pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="35pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="42pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Fair Value </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Level&nbsp;I </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Level&nbsp;II </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Level&nbsp;III </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bridge note acceleration option</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>471</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>471</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Liabilities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;A conversion option</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,612</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,612</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bridge note detachable warrant</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,039</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,039</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> Fair Value at December&nbsp;31, 2009  </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="49pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="35pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="42pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Fair Value </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Level&nbsp;I </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Level&nbsp;II </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Level&nbsp;III </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Liabilities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Series&nbsp;A conversion option</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,340</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,340</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-20</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=11,SEQ=190,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=688942,FOLIO='F-20',FILE='DISK126:[11ZDO1.11ZDO78101]FO78101A.;7',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
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NAME="page_fq78101_1_21"> </A>


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</FONT> <FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp.  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (3) Fair Value of Financial Instruments (Continued)  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below presents the activity of our assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level&nbsp;3) for the years ended
December&nbsp;31, 2010 and 2009 and the six months ended June&nbsp;30, 2011 (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="54pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="56pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Series&nbsp;A<BR>
Conversion<BR>
Option </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Bridge&nbsp;Note<BR>
Detachable<BR>
Warrant </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Bridge&nbsp;Note<BR>
Acceleration<BR>
Option </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Liability (asset) as of January&nbsp;1, 2009</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Fair value of liability at issue date</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,279</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Unrealized loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>61</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Liability as of December&nbsp;31, 2009</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,340</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Fair value of liability (asset) at issue date</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>81</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,778</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(718</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Unrealized loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1,191</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>261</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>247</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Liability (asset) as of December&nbsp;31, 2010</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2,612</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,039</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(471</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Unrealized loss (gain)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>440</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>775</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(118</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Realized loss on conversion</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>589</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Conversion of Bridge notes to Series&nbsp;B convertible redeemable preferred shares</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3,814</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Liability as of June&nbsp;30, 2011 (Unaudited) (Note&nbsp;9)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3,052</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unrealized
gains and losses are recognized as a component of other expense, net, on the accompanying Combined and Consolidated Statements of Operations. The loss on conversion was
recognized as a component of loss on extinguishment of debt on the accompanying consolidated statement of operations for the six months ended June&nbsp;30, 2011. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (4) Inventories  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories consist of the following (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Raw materials</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8,961</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,857</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13,276</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Work-in-process</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,058</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,963</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,665</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Finished goods inventory</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8,159</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>40</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>552</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>19,178</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,860</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>16,493</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the years ended December&nbsp;31, 2010, 2009, and 2008 and the six months ended June&nbsp;30, 2011 and 2010, we recognized inventory impairments, primarily to reduce the value
of our inventory to market, which was lower than cost, of $4.6&nbsp;million, $4.4&nbsp;million, $5.9&nbsp;million, $3.7&nbsp;million, and </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-21</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=191,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=396542,FOLIO='F-21',FILE='DISK126:[11ZDO1.11ZDO78101]FQ78101A.;10',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
<A NAME="page_fq78101_1_22"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (4) Inventories (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>$2.9&nbsp;million,
respectively. The charges related to these inventory impairments were recognized as a component of cost of revenue on our combined and consolidated statements of operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (5) Other Current Assets  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current assets consist of the following (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Prepaid expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,259</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,173</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,369</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deferred offering costs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,046</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Bridge note acceleration option</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>471</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deferred financing costs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>378</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,108</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,173</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,415</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> (6) Property, Plant and Equipment  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A summary of property, plant and equipment is as follows (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Leased forklifts</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,587</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,875</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,638</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Machinery and equipment</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>510</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,332</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Furniture, fixtures and equipment</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>923</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>537</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,203</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Property, buildings and leasehold improvements</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>847</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>763</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>906</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vehicles</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,192</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>679</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,355</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,559</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,364</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,434</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accumulated depreciation and amortization</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2,195</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1,645</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2,972</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,364</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,719</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,462</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Construction in progress</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>247</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>193</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>285</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,611</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,912</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,747</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-22</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=192,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=1047283,FOLIO='F-22',FILE='DISK126:[11ZDO1.11ZDO78101]FQ78101A.;10',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
<A NAME="page_fq78101_1_23"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (6) Property, Plant and Equipment (Continued) </B></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depreciation
expense was recognized in our combined and consolidated statements operations as follows (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Years ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Six months ended June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Cost of revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>494</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>311</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>343</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>348</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>206</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Selling, general and administrative</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>451</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>368</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>484</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>380</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>185</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>945</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>679</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>827</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>728</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>391</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> (7) Other Current Liabilities  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other current liabilities consist of the following (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accrued expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,701</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,310</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,250</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Litigation settlement accrual</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,701</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,310</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,250</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
litigation settlement accrual is further discussed in Note&nbsp;13, "Commitments and Contingencies." </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (8) Other Long-term Liabilities  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other long-term liabilities consist of the following (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Warranty reserve, long-term</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>568</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,209</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,260</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Litigation settlement accrual</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deferred revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>573</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>798</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>129</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>60</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,149</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,019</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,449</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
warranty reserve and the litigation settlement accrual are further discussed in Note&nbsp;13, "Commitments and Contingencies." </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-23</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fq78101_1_24"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (9) Convertible Debt and Convertible Redeemable Preferred Stock  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have issued 10% Series&nbsp;A secured convertible debentures ("Series&nbsp;A Debentures") and 12% senior unsecured convertible promissory bridge notes ("Bridge Notes"). These
instruments are referred to collectively as our "Convertible Debt". </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
separately value and record the initial fair value of the separable derivatives within our Convertible Debt instruments, including a conversion feature, detachable stock warrants, and
an acceleration feature. We calculate the fair value of the derivatives as of the end of each reporting period and recognize the change in fair value as a component of other expense, net on the
statement of operations. Fair value was calculated using a binomial model and key inputs were probability and estimated timing of conversion, enterprise value, volatility, the risk-free
interest rate and the anticipated dividend rate. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
convertible debt had scheduled maturities, exclusive of discount, as of December&nbsp;31, 2010 and June&nbsp;30, 2011 as follows (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="88pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="65pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, 2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, 2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Less than 1&nbsp;year</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14,150</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>1 - 2&nbsp;years</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2 - 3&nbsp;years</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,889</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>3 - 4&nbsp;years</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10,425</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8,236</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>4 - 5&nbsp;years</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>700</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>25,275</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>11,125</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B><I> Series&nbsp;A Convertible Debentures  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2009, we initiated a private placement offering for sale up to 150 units at a price of $100,000 per unit or an aggregate of
$15.0&nbsp;million. Each unit consisted of one Series&nbsp;A Debenture in the principal amount of $100,000 and 6,666 shares of our common stock. Each Series&nbsp;A Debenture has a five year term
and bears interest, payable in shares of our common stock, at the rate of 10% per annum. The Series&nbsp;A Debentures are secured by all of our assets and have a preference upon liquidation over our
common stock. We may prepay principal and interest on the Series&nbsp;A Debentures at any time without penalty. The Series&nbsp;A Debentures may be converted, but are not required to be converted,
by the holder at 80% of the price at which shares of our common stock are valued in an initial public offering or at 80% of the price at which shares of our common stock are sold in a reorganization
transaction. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2009 and 2010, we sold 111 of the 150 authorized units and received total proceeds of approximately $11.1&nbsp;million. The Series&nbsp;A Debentures contain a conversion right
(the "Series&nbsp;A Conversion Option") that represents a derivative instrument. The proceeds from the issuance of the units were allocated on a relative fair value basis between the shares of
common stock and the Series&nbsp;A Debentures. An additional discount was established based on the Series&nbsp;A Debentures, as a result of bifurcating the Series&nbsp;A Conversion Option, equal
to the fair value of the Series&nbsp;A Conversion Option. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-24</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=194,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=1037293,FOLIO='F-24',FILE='DISK126:[11ZDO1.11ZDO78101]FQ78101A.;10',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
<A NAME="page_fq78101_1_25"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (9) Convertible Debt and Convertible Redeemable Preferred Stock (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>The
shares of common stock included in the units and the Series&nbsp;A Conversion Option were valued, upon issuance, at approximately $374,000 and $1.4&nbsp;million, respectively. This difference
between the proceeds of the debentures and the Series&nbsp;A Debenture principal was recorded as a discount on the debt. The recorded debt discount is accreted by recording non-cash
charges to interest expense over the expected life of the Series&nbsp;A Debentures using the effective interest rate method. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
carrying value of the Series&nbsp;A Debentures was $9.9&nbsp;million and $8.9&nbsp;million as of December&nbsp;31, 2010 and 2009, respectively, and was $10.0&nbsp;million
as of June&nbsp;30, 2011. The fair value of the Series&nbsp;A Conversion Option, calculated using a binomial valuation model, was $2.6&nbsp;million and $1.3&nbsp;million as of
December&nbsp;31, 2010 and 2009, respectively, and $3.1&nbsp;million as of June&nbsp;30, 2011. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
total debt discount is amortized using the effective interest method over the 60-month term of the Series&nbsp;A Debentures. We recognized amortization of debt discount
costs of approximately $347,000 and $121,000 as a component of interest expense during the years ended December&nbsp;31, 2010 and 2009, respectively, and approximately $172,000 for both the six
months ended June&nbsp;30, 2011 and 2010. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued
interest amounted to approximately $1.5&nbsp;million and $390,000 as of December&nbsp;31, 2010 and 2009, respectively, and approximately $2.2&nbsp;million as of
June&nbsp;30, 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
commission of 5% of the amount of proceeds we received in the Series&nbsp;A private placement, subject to certain exceptions, was paid to Wynston Hill Capital&nbsp;LLC ("Wynston
Hill"), a related party. Wynston Hill earned commissions of approximately $34,000 and $521,000 during the years ended December&nbsp;31, 2010 and 2009, respectively, related to the Series&nbsp;A
private placement. These commissions are reflected as deferred financing costs and are included as a component of other current assets and other long-term assets on the accompanying
combined and consolidated balance sheets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Deferred
financing costs related to the Series&nbsp;A private placement consisted of the following (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="34pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deferred financing costs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>555</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>521</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>555</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Less: accumulated amortization</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(150</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(39</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(205</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>405</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>482</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>350</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-25</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=195,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=893877,FOLIO='F-25',FILE='DISK126:[11ZDO1.11ZDO78101]FQ78101A.;10',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
<A NAME="page_fq78101_1_26"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (9) Convertible Debt and Convertible Redeemable Preferred Stock (Continued) </B></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
expense on the Series&nbsp;A Debentures is as follows (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Six Months Ended June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,148</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>390</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>615</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>557</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accretion of debt discount</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>347</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>121</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>172</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>172</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Amortization of deferred financing costs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>111</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>39</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>55</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>36</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,606</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>550</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>842</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>765</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B><I> Convertible Promissory Bridge Notes  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2010, we initiated a private placement offering for $15.0&nbsp;million of units. Each unit consisted of a Bridge Note with a
principal amount of $500,000 and a detachable warrant with a stated exercise price of $0.01 that allowed the holder to purchase 25% of the amount of securities into which the Bridge Note is
convertible. The stated term of each Bridge Note was the lesser of one year from the issue date or the date of an equity offering resulting in gross proceeds to the Company of at least
$20.0&nbsp;million (a "Qualified Offering"). These Bridge Notes are unsecured and are senior in liquidation to the Series&nbsp;A Debentures. Interest on the Bridge Notes is payable at a rate of
12% per annum. Upon a successful Qualified Offering, the principal and interest are due and payable immediately or, at the discretion of the note holder, the debt and/or accrued interest may be
converted into shares of the equity security issued in the Qualified Offering at a conversion price equal to the price per share of the equity securities issued in the Qualified Offering. We sold
Bridge Notes with a principal amount of $14,150,000 during 2010. Accrued interest on our Bridge Notes as of December&nbsp;31, 2010 was approximately $791,000. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
warrant included with each Bridge Note is exercisable at the option of the holder from the date of the Qualified Offering through the second anniversary of the issue date of the
warrant. The Bridge Note does not need to be converted to stock in order to exercise the warrant. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
concluded that the acceleration of maturity of the Bridge Note upon a Qualified Offering represented an embedded derivative and, accordingly, recognized the approximate $718,000
initial fair value of the benefit to us as an asset, included as a component of other current assets on the balance sheet. Fair value was calculated using a discounted cash flow model and the key
inputs were probability and timing of an acceleration event and interest rate. We refer to this derivative as the "Bridge Note Acceleration Option." </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
concluded that the detachable warrants represent a liability because they do not represent an option to acquire a fixed number of shares of stock for a fixed strike price. Based on
the assumptions for a Qualified Offering and concurrent exercise of the warrants, we recognized the approximate $2.8&nbsp;million warrant initial fair value as a current liability. Fair value was
calculated using a binomial </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-26</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=6,SEQ=196,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=568215,FOLIO='F-26',FILE='DISK126:[11ZDO1.11ZDO78101]FQ78101A.;10',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
<A NAME="page_fq78101_1_27"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (9) Convertible Debt and Convertible Redeemable Preferred Stock (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>model
and key inputs were probability and timing of a Qualified Offering, enterprise value, volatility, the risk-free interest rate and the anticipated dividend rate. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
recognized an initial debt discount of approximately $2.1&nbsp;million, which represents the net initial fair value of the detachable warrants net of the benefit of the Bridge Note
Acceleration Option, as a reduction to the Bridge Note liability. The discount is accreted to interest expense using the effective
interest method over the one-year Bridge Note contractual term. As of December&nbsp;31, 2010, the debt discount, net of approximately $965,000 of accretion, was approximately
$1.1&nbsp;million and will be recognized as interest expense during 2011. During the six months ended June&nbsp;30, 2011, we recognized $375,000 of the amount as interest expense and the remaining
$720,000 was recognized as a component of loss on extinguishment of debt. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
commission of 5% of the amount of proceeds we received in the Bridge Note financing, subject to certain exceptions, was paid to Wynston Hill, a related party. Wynston Hill earned
commissions of approximately $708,000 during 2010 related to this private placement. This commission was reflected as deferred financing cost and is included as a component of other current assets on
the combined balance sheets. Amortization of deferred financing costs reported as interest expense, using the effective-interest amortization method, was approximately $329,000 for the year ended
December&nbsp;31, 2010. During the six months ended June&nbsp;30, 2011, we recognized $128,000 of the amount as interest expense and the remaining $251,000 was recognized as a component of loss on
extinguishment of debt. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest
expense on the Bridge Notes is summarized as follows (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year Ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Six Months Ended June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>791</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>316</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>170</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accretion of debt discount</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>965</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>375</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>211</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Amortization of deferred financing costs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>329</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>128</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>74</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,085</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>819</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>455</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
March 2011, substantially all of the Bridge Notes, accrued interest, and detachable warrants were converted to shares of Series&nbsp;B preferred stock and the remainder were
settled by cash payment of approximately $171,000. On conversion and cash payment, we recognized a loss on extinguishment of debt of approximately $971,000. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> Convertible Redeemable Preferred Stock  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During March 2011, in a private placement we sold approximately 3,239,000 shares of our Series&nbsp;B convertible preferred stock,
par value $0.001 per share ("Series&nbsp;B preferred stock"), for cash proceeds of $39.0&nbsp;million and we issued an additional approximately 1,570,000 shares of Series&nbsp;B preferred stock
upon the conversion of our outstanding bridge notes and the holders' exercise of the related warrants. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-27</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=7,SEQ=197,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=525707,FOLIO='F-27',FILE='DISK126:[11ZDO1.11ZDO78101]FQ78101A.;10',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
<A NAME="page_fq78101_1_28"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (9) Convertible Debt and Convertible Redeemable Preferred Stock (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>We
paid Wynston Hill, a related party, commission of approximately $1.2&nbsp;million related to this private placement. Shares of our Series&nbsp;B preferred stock, which are
non-interest bearing and non-participating, have the right to vote, on an as-converted basis, together with shares of our common stock on all matters which are
subject to a vote of our common stock, and also have separate voting rights with respect to certain amendments of our second amended and restated certificate of incorporation and certain liquidation
events. Our Series&nbsp;B preferred stock has a liquidation preference of $12.04 per share (subject to adjustment) over our common stock. Our Series&nbsp;B preferred stock is convertible, on a
one-to-one basis, into shares of our common stock at any time at the election of the holder of the Series&nbsp;B preferred stock or automatically in the event of a firm
commitment underwritten public offering of our common stock, and is subject to certain anti-dilution protections. On or after March&nbsp;1, 2018, the holders of at least a majority of
the outstanding shares of Series&nbsp;B preferred stock can require us to redeem, over a three year period, all outstanding shares of Series&nbsp;B preferred stock at a redemption value of $12.04
per share. As redemption of Series&nbsp;B preferred stock is outside our control, the Series&nbsp;B preferred stock is not included as a component of stockholders' equity on the accompanying
consolidated balance sheet as of June&nbsp;30, 2011 or on the accompanying consolidated statement of stockholders' deficit for the six months ended June&nbsp;30, 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (10) Share-Based Compensation  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Equity Incentive Compensation Plan  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December 2009, the Smith US Board of Directors approved the Smith Electric Vehicles US Corp. 2009 Incentive Compensation Plan (the
"2009 Plan"), which provides for the grant of incentive stock options and nonqualified stock options or other awards to our employees, officers, directors, and outside consultants to purchase up to an
aggregate of 1,119,400 shares of our common stock. In addition, the Board, in its sole discretion, may make awards outside of the 2009 Plan. As an inducement to key employees, stock options and
unvested shares are issued outside of the 2009 Plan from time to time. Stock options are (i)&nbsp;granted at an option exercise price equal to the fair market value of Smith US's common stock on the
date of grant, (ii)&nbsp;are non-qualified options, (iii)&nbsp;are exercisable for up to 10&nbsp;years from the date of grant, and (iv)&nbsp;vest 100% within two years of the grant
date. We anticipate that all shares we issue to settle our equity grants will be original issue shares. Accordingly, we do not anticipate we will repurchase shares on the open market during 2011 or
2012 for the purpose of settling our equity grants. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Stock Options  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We utilize the Black-Scholes option valuation model to calculate the fair value of each stock option. Expected volatility is based on
the historical volatility of stocks of comparable "clean energy" companies traded on an exchange. The expected terms of the options were calculated using the simplified method given our limited
historical exercise data. The risk free interest rate is based on the U.S. Treasury rate at the time of the grant for instruments of a comparable life. Our valuation model assumes a zero dividend
rate. Due to the limited number of grants issued combined with the relatively short vesting periods of less than two years, we initially estimate that all awards will vest. Forfeitures of </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-28</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=8,SEQ=198,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=378583,FOLIO='F-28',FILE='DISK126:[11ZDO1.11ZDO78101]FQ78101A.;10',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
<A NAME="page_fq78101_1_29"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (10) Share-Based Compensation (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>awards
are recognized in the period the forfeiture occurs. Compensation cost for each period is based on the percentage of the requisite service that has been rendered through the end of the period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
assumptions used to record share-based compensation expense for stock options are as follows: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="88pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="84pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year ended<BR>
December&nbsp;31, 2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Six Months ended<BR>
June&nbsp;30, 2011 </B></FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected volatility</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>74.0%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>76.5%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Weighted-average volatility</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>74.0%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>76.5%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected dividends</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.0%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>0.0%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Expected term (in years)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.6&nbsp;-&nbsp;5.9</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>5.8&nbsp;-&nbsp;6.0</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Risk-free rate</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.5&nbsp;-&nbsp;2.6%</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>2.3%</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
summary of our stock option activity, and related information, for the year ended December&nbsp;31, 2009 is as follows: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="47pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="56pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of<BR>
Shares </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Aggregate<BR>
Intrinsic<BR>
Value </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Remaining<BR>
Contractual<BR>
Term<BR>
(in years) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding at December&nbsp;31, 2008</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Issued</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>513,376</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.73</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Forfeited</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding at December&nbsp;31, 2009</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>513,376</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.73</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vested or expected to vest at December&nbsp;31, 2009</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>513,376</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.73</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>9.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Exercisable at December&nbsp;31, 2009</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-29</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=9,SEQ=199,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=435571,FOLIO='F-29',FILE='DISK126:[11ZDO1.11ZDO78101]FQ78101A.;10',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
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</FONT> <FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp.  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (10) Share-Based Compensation (Continued)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A summary of our stock option activity, and related information, for the year ended December&nbsp;31, 2010 is as follows: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="56pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of<BR>
Shares </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Exercise<BR>
Price </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Aggregate<BR>
Intrinsic<BR>
Value </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Weighted<BR>
Average<BR>
Remaining<BR>
Contractual<BR>
Term<BR>
(in years) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding at December&nbsp;31, 2009</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>513,376</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.73</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Issued</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Forfeited</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(256,688</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.73</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding at December&nbsp;31, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>256,688</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.73</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vested or expected to vest at December&nbsp;31, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>256,688</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.73</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,618,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8.9</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Exercisable at December&nbsp;31, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
summary of our stock option activity, and related information, for the six months ended June&nbsp;30, 2011 (unaudited) is as follows: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="51pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="56pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Number of Shares </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Weighted Average Exercise Price </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Aggregate Intrinsic Value </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Weighted Average Remaining Contractual Term (in years) </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding at December&nbsp;31, 2010</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>256,668</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.73</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Issued</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>458,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12.04</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Forfeited</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Outstanding at June&nbsp;30, 2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>714,688</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7.98</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Vested or expected to vest at June&nbsp;30, 2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>714,688</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7.98</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,903,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>9.3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Exercisable at June&nbsp;30, 2011</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>256,688</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>0.73</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,903,000</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8.4</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
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 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
aggregate intrinsic values reflected in the tables above includes only those option awards for which the exercise price is less than the estimated fair value as of
December&nbsp;31, 2009, December&nbsp;31, 2010 or June&nbsp;30, 2011, as applicable. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
stock options vest over varying terms (14&nbsp;months to 24&nbsp;months) and expire 10&nbsp;years from the grant date. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
the year ended December&nbsp;31, 2009 and during the six months ended June&nbsp;30, 2011, we issued stock options with a fair value of approximately $243,000 and
$3.7&nbsp;million, respectively. We did not issue any stock options during the years ended December&nbsp;31, 2010 or 2008. Through June&nbsp;30, 2011, no stock options had been exercised. We
recognized compensation expense, which is a non-cash charge, related to stock options of approximately $365,000, $96,000 and $6,000 during the periods ended June&nbsp;30, 2011 and
December&nbsp;31, 2010 and 2009, respectively. The recognized compensation expense is </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-30</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fs78101_1_31"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (10) Share-Based Compensation (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>included
as a component of selling, general and administrative expense. There was no income tax effect related to the stock option compensation expense during any of the above periods as deferred
income tax benefits otherwise provided were offset by valuation allowances as discussed in Note&nbsp;12, "Income Taxes." </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2010, we had approximately $20,000 of future unrecognized compensation costs related to stock options that is expected to be recognized over a weighted average
period of less than one year. As of June&nbsp;30, 2011, we had approximately $3.3&nbsp;million of future unrecognized compensation costs related to stock options that is expected to be recognized
over a weighted average period of approximately 1.6&nbsp;years. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
exercise prices of the stock options issued through June&nbsp;30, 2011 were determined based on the estimated fair value of our common stock at the date of issue. Because there is
no public market for our common stock, management considers a number of objective and subjective factors when determining the fair value of our common stock. Objective and subjective factors
considered include recent sales of our convertible securities to unrelated third parties, valuations using the invested capital and private financing approaches, our operating and financial
performance during intervening periods, and the lack of liquidity in our common stock. Based on these factors, management estimated the fair
market value of our common stock to be $0.73 per share for shares issued during 2009 and $12.04 per share for shares issued during 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Restricted Stock Awards  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During April 2011, we issued 126,777 shares of restricted common stock with a weighted average grant date value of $12.04 per share and
an estimated aggregate intrinsic value of $1.5&nbsp;million as of June&nbsp;30, 2011. These shares issued vest 100% at the end of 19&nbsp;months from issue date. During the six months ended
June&nbsp;30, 2011, we recognized compensation expense, included as a component of selling, general and administrative expense, related to these restricted shares of $161,000. There was no income
tax effect related to the restricted stock compensation expense as deferred income tax benefits otherwise provided were offset by valuation allowances as discussed in Note&nbsp;12, "Income Taxes."
As of June&nbsp;30, 2011, we had approximately $1.4&nbsp;million of future unrecognized compensation costs related to shares of restricted stock that is expected to be recognized over a weighted
average period of approximately 1.5&nbsp;years. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (11) Warrants  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Concurrent with the formation of Smith US in January 2009, Smith US issued a warrant to Tanfield that Tanfield could exercise to preserve its 49% ownership interest in Smith US, which
was amended in December 2009. As amended, the warrant was exercisable for five years for the purchase of the number of shares of our common stock, at a strike price of $0.01 per share, equal to 49% of
(i)&nbsp;the number of shares of common stock issued and vested pursuant to the 2009 Plan (see Note&nbsp;10, "Share-Based Compensation"), (ii)&nbsp;the number of shares of common stock issued to
the investors in the Series&nbsp;A private placement described under Note&nbsp;9, "Convertible Debt and Convertible Redeemable Preferred Stock" for amounts invested over $7.5&nbsp;million and up
to $10.0&nbsp;million, (iii)&nbsp;the </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-31</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fs78101_1_32"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (11) Warrants (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>number
of shares of common stock issued to the investors in such Series&nbsp;A private placement for amounts invested over $10.0&nbsp;million and up to $15.0&nbsp;million, provided that such
amounts were invested on or prior to August&nbsp;7, 2009, and (iv)&nbsp;the number of shares of our common stock issued to Roy Stanley under our services agreement with him (see Note&nbsp;15,
"Related Party Transactions") (collectively, the "Available Warrant Shares"). At date of issue, the fair value of the warrant, calculated using the Black-Scholes valuation model, was approximately
$37,000 and included within stockholders' deficit. Since the warrant did not meet the net-settlement criteria, the warrant was not subject to revaluation. During March 2010, Tanfield
exercised its warrant, in part, and received 640,468 shares of our common stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See
Note&nbsp;9, "Convertible Debt and Convertible Redeemable Preferred Stock" for a discussion of the detachable warrants issued in conjunction with our Bridge Notes. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (12) Income Taxes  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have operations in both the United States and the United Kingdom. Under the terms of the January&nbsp;1, 2011 acquisition of Smith UK by Smith US, Tanfield is responsible for all
Smith UK tax liabilities and receives the benefit of all tax benefits, including net operating losses, through December&nbsp;31, 2010. As these financial statements have been prepared to present the
historical financial position, results of operations and cash flows of Smith UK throughout the periods presented, we have included the tax effects, including the net operating loss asset and deferred
tax assets and liabilities, of Smith UK transactions for the three years ended December&nbsp;31, 2010 and as of December&nbsp;31, 2010 and 2009. The tax effects for the six months ended
June&nbsp;30, 2011 and 2010 include only the effects of transactions occurring during that six month period. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net
loss before income tax benefit for domestic and foreign operations is as follows (in thousands): </FONT></P>
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<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Six months ended June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>United States</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(25,433</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8,822</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(17,715</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(7,496</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>United Kingdom</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(4,831</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(8,676</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(22,310</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(3,561</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(2,025</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(30,264</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(17,498</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(22,310</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(21,276</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9,521</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-32</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=202,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=511890,FOLIO='F-32',FILE='DISK126:[11ZDO1.11ZDO78101]FS78101A.;10',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
<A NAME="page_fs78101_1_33"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (12) Income Taxes (Continued) </B></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. Significant components of our deferred tax assets and liabilities are as follows (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH COLSPAN=3 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deferred tax assets:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net operating loss carryforwards:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>United States</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,896</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,484</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>10,149</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>United Kingdom</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,598</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,076</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,038</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Research and development</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,112</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,544</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Inventory and warranty reserves</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,783</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,372</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,897</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Start-up costs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,137</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,237</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,096</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accrued expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,023</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,052</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>132</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deferred revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>180</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>784</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Property, plant and equipment</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>59</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accounts receivable</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>26</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>290</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>104</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>371</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>20,019</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13,653</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>14,768</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Valuation allowance</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(19,622</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(12,875</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(14,726</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total deferred tax assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>397</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>778</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>42</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Deferred tax liabilities:</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Property, plant and equipment</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(193</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(275</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Prepaid expenses</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(138</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(134</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(42</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accounts receivable</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(66</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(369</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total deferred tax liabilities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(397</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(778</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(42</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net deferred tax liabilities</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=3 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon
acquisition of Smith Europe on January&nbsp;1, 2011, all of Smith UK's deferred tax assets and liabilities in existence as of December&nbsp;31, 2010 were retained by Tanfield,
Smith UK's prior owner. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-33</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=203,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=428221,FOLIO='F-33',FILE='DISK126:[11ZDO1.11ZDO78101]FS78101A.;10',USER='JMCGUAN',CD=';8-NOV-2011;22:52' -->
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (12) Income Taxes (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
reconciliation of income tax computed at the U.S. statutory tax rate to income tax expense is as follows (in thousands): </FONT></P>
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<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
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<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Year ended December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Federal income tax benefit at U.S. statutory rate</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(10,290</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(5,949</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(7,585</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>State income tax benefit, net of federal tax effect</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(539</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(316</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Foreign tax rate differential</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>288</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>519</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,336</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Nondeductible legal costs</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,395</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>17</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest paid in kind</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>659</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>133</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Fair market value derivative</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>577</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>21</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Debt discount amortization</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>446</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>41</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other, net</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>242</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>119</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>11</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total income tax benefit</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(7,222</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(5,415</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(6,238</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Valuation allowance</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,222</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,415</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,238</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net income tax benefit</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
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 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management
believes that based on the available information, it is more likely than not that the deferred tax assets will not be realized, such that a full valuation allowance is
required against all net deferred tax assets. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of December&nbsp;31, 2010 and June&nbsp;30, 2011, we had approximately $15.8&nbsp;million and $27.1&nbsp;million, respectively, of federal and state operating loss
carryforwards available to offset future taxable income. These federal and state operating loss carryforwards will, if unused, expire in varying amounts beginning in 2029. As of June&nbsp;30, 2011,
we had approximately $3.6&nbsp;million of U.K. net operating losses, which do not expire, available to offset future taxable income. At December&nbsp;31, 2010 and at June&nbsp;30, 2011, a
partial valuation allowance existed against our net operating loss carryforwards as we did not believe it is more likely than not that the carryforwards will be utilized prior to expiration. In making
this determination, we did not consider future taxable income as we have incurred losses in each period since our U.S. inception. We only considered taxable income to the extent of reversals of net
temporary differences in existence as of December&nbsp;31, 2010 and June&nbsp;30, 2011. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal
and state laws impose substantial restrictions on the utilization of net operating loss and tax credit carry-forwards in the event of an "ownership change," as defined in
Section&nbsp;382 of the Internal Revenue Code. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Uncertain Tax Positions  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely
than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-34</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fs78101_1_35"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (12) Income Taxes (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>is
the largest benefit that has a greater than 50&nbsp;percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Accrued interest and penalties related to
unrecognized tax benefits are classified as income tax expense. We considered the tax positions for which the statute of limitations remained open and concluded that we have no uncertain tax
positions, and therefore no accrued interest or penalties, as of December&nbsp;31, 2010, 2009, or 2008 and June&nbsp;30, 2011. We do not anticipate that our conclusions regarding unrecognized tax
benefits will significantly increase or decrease within the next 12&nbsp;months. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
file income tax returns in the United States, the State of Missouri, and the United Kingdom. Tax years 2010 and 2009 (the year of our inception in the U.S.) remain subject to
examination for federal and Missouri purposes. All net operating losses and tax credits generated to date are subject to adjustment for U.S. federal and Missouri purposes. Effective January&nbsp;1,
2011, upon the acquisition of Smith UK by Smith US, we are not responsible for tax examinations or the resulting liabilities of Smith UK for tax years 2010 and prior. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (13) Commitments and Contingencies  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating Leases</I></B></FONT><FONT SIZE=2>&#151;We have operating lease agreements for office and production space at various locations. These lease agreements expire at various
dates through 2015 and certain of them contain provisions for extension on substantially the same terms as are in effect. Where leases contain escalation clauses, we apply them in the determination of
straight-line rent expense over the lease term. Future minimum payments under operating leases at December&nbsp;31, 2010 are as follow (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:50%;margin-left:25%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="10pt" style="font-family:times;"></TD>
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Period ending December&nbsp;31:</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2011</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>574</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2012</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>152</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2013</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>42</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2014</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>42</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>2015</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>32</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>842</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD COLSPAN=2 VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rent
expense incurred under all operating leases was approximately $1.1&nbsp;million, $852,000 and $677,000 for the periods ended December&nbsp;31, 2010, 2009 and 2008, respectively,
and $600,000 and $500,000 for the six month periods ended June&nbsp;30, 2011 and 2010, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Included
in rent expense are balances charged under an obligation with Tanfield for the use of office and production space. Rent expense under this arrangement amounted to approximately
$321,000, $337,000 and $452,000, for the years ended December&nbsp;31, 2010, 2009 and 2008, respectively, and $219,000 and $160,000 for the six month periods ended June&nbsp;30, 2011 and 2010,
respectively. Prior to January&nbsp;1, 2011, rent expense was charged through intercompany allocation and no commitment existed as of December&nbsp;31, 2010. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-35</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fs78101_1_36"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (13) Commitments and Contingencies (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective
January&nbsp;1, 2011, upon separation from Tanfield, we entered into an arrangement with Tanfield for the use of this office and production space. The agreement requires
monthly rental payments of &pound;23,500, or approximately $36,500, plus certain property related costs, through December
2013 and is cancellable by either party providing a six month notice. Additional lease commitments under this extension amount to approximately $1.3&nbsp;million. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2011, we renewed for an additional year the leases for our corporate office and production facility in Kansas City, Missouri on substantially the same terms and conditions as the
original leases. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product Warranty</I></B></FONT><FONT SIZE=2>&#151;Included in the warranty cost accruals are costs for basic warranty coverage on vehicles sold and additional service actions,
such as
product repairs and other customer service actions. During 2007, Smith UK introduced the Newton and Edison models, which are on-road vehicles that used lithium-ion batteries.
Smith US sold its first vehicle during the fourth quarter of 2009. As a result, our estimates for warranty costs are based on limited historical warranty claim experience. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Included
in our December&nbsp;31, 2010 warranty accrual is approximately $1.4&nbsp;million in additional service action costs related to defective batteries. We have received
commitments from our vendors to reimburse us for a substantial portion of the additional service action costs and recorded $1.2&nbsp;million within other receivables as of December&nbsp;31, 2010
and $0.7&nbsp;million as of June&nbsp;30, 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Product
warranty accruals were as follows (in thousands): </FONT></P>
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<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Beginning reserve</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,316</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>999</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,693</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Warranty expense</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,139</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,597</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,512</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Change in vendor service action receivable</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,165</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(218</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Warranty costs incurred</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1,697</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(562</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(1,237</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Foreign currency translation and other</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(230</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>274</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>143</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Ending reserve</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,693</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,316</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,893</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warranty
reserves were recognized as current and long-term as follows (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Current</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,125</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,107</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,633</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Long-term</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>568</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,209</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,260</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Ending reserve</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,693</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,316</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,893</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Legal Matters</B></FONT><FONT SIZE=2>&#151;From time to time and in the ordinary course of business, we are named as a defendant in legal proceedings related to various issues,
including worker's compensation claims, tort </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-36</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fs78101_1_37"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (13) Commitments and Contingencies (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>claims
and contractual disputes. While the resolution of such matters may have an impact on our financial results for the period in which they are resolved, we believe that the disposition of these
matters will not, individually or in the aggregate, have a material effect upon our business, liquidity, or consolidated financial statements. Legal and other expenses related to such legal
proceedings are expensed as incurred. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
March 2011, Jefferies&nbsp;&amp; Company,&nbsp;Inc. ("Jefferies") filed suit against Smith in the New York Supreme Court, County of New York for alleged breach of an engagement letter
for Jefferies' provision of financial advisory services. The events underlying the suit occurred during 2010 and, accordingly, management determined that the suit should be evaluated as a contingent
liability as of December&nbsp;31, 2010. Based on management's best estimate of a settlement amount, we have an accrued liability of $4.0&nbsp;million as of both June&nbsp;30,<SUP>,</SUP> 2011
and December&nbsp;31, 2010. During August 2011, we and Jefferies agreed to settle the lawsuit. Under the settlement, we paid Jefferies $2.0&nbsp;million during September 2011, and executed
separate promissory notes, bearing interest at 9% per annum, to pay $1.0&nbsp;million plus accrued interest by February&nbsp;26, 2012 and an additional $1.0&nbsp;million plus accrued interest by
July&nbsp;31, 2012. As a part of the terms of settlement, the parties agreed to a mutual release of claims relating to the subject matter of the lawsuit. The promissory notes may be prepaid without
penalty at any time and, if we receive proceeds through an initial public offering, any unpaid promissory note principal and interest becomes immediately due and payable. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (14) Retirement Plan  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smith UK provides employees with a group personal pension plan administered by a third party. There were separate plans depending on whether the employee was employed by the operating
division of Tanfield or by the wholly-owned subsidiary of Tanfield. Each employee has an individual plan policy document in their own name. These plans are defined contribution plans under which Smith
UK made contributions, which vested immediately, and under which the employee could contribute on a voluntary basis. Once the required contributions are made, Smith UK has no further obligation under
the plans. We recognized contribution expense related to these plans of approximately $122,000, $132,000, and $175,000 for the years ended December&nbsp;31, 2010, 2009 and 2008, respectively, and
approximately $110,000 and $60,000 for the six months ended June&nbsp;30, 2011 and 2010, respectively. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (15) Related Party Transactions  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Founders Shares  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January 2009 we issued 8,999,089 shares of our common stock to our founders ("Founders Shares") with a fair market value at date of
issue of $0.08 per share. The fair market value of $0.08 per share was determined using a cost approach method based upon the cost the shareholders incurred on or before the inception date. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
issued 4,409,549 Founders Shares to Tanfield, valued at approximately $318,000, in consideration of the right to enter into a license agreement, which was recorded as a contributed </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-37</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fs78101_1_38"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER&nbsp;31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER&nbsp;31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE&nbsp;30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE&nbsp;30, 2011 AND 2010 IS UNAUDITED.) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (15) Related Party Transactions (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>intangible
asset. The general terms of this agreement were agreed to with the issuance of the shares in January 2009 followed by the execution of the agreement in August 2009. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
issued 797,063 Founders Shares to Wynston Hill for consulting services rendered in connection with our formation, development of a company business plan, and financial advice. Upon
our formation in January 2009, we recognized professional services expense of approximately $64,000 for these services as a component of selling, general and administrative expense in our statement of
operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
issued 1,793,677 Founders Shares to our two initial executive officers for services rendered in connection with our founding. Upon formation in January 2009, we recognized
compensation expense
of approximately $143,000 for these services as a component of selling, general and administrative expense in our statement of operations. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
issued 1,998,800 Founders Shares to an executive officer with restrictions of forfeiture if the officer was not named Chairman of the Board by December&nbsp;31, 2009. We concluded
that the performance condition was not probable of being attained by December&nbsp;31, 2009 and therefore, no compensation expense was recognized upon formation. In December 2009, the Board of
Directors appointed Roy Stanley, former CEO and Chairman of Tanfield, as Chairman of the Board, and the 1,998,800 shares were awarded to him with no performance or service conditions. We recognized
compensation expense of approximately $1.5&nbsp;million related to these shares in December 2009 based on our estimate of the fair market value of stock issued. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Warrant  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Upon our formation, as described in Note&nbsp;11, "Warrants", we issued Tanfield an anti-dilution warrant for shares of
common stock upon the occurrence of certain events. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Commissions  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As described in Note&nbsp;9, "Convertible Debt and Convertible Redeemable Preferred Stock", during 2010 and 2009 we paid Wynston Hill
a 5% commission in connection with our Series&nbsp;A and Bridge Note financings. During the six months ended June&nbsp;30, 2011, we paid Wynston Hill a commission of $1.2&nbsp;million for
serving as placement agent in connection with the private placement of our Series&nbsp;B preferred stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Goods and services  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As described in Note&nbsp;13, "Commitments and Contingencies", Smith UK was charged rent expense under an obligation with Tanfield
for the use of office and production space. In addition, Smith UK was contractually obligated to Tanfield for management fees and certain shared expenses, which amounted to approximately
$1.9&nbsp;million, $2.1&nbsp;million, and $1.3&nbsp;million during 2010 and 2009 and 2008, respectively and approximately $1.0&nbsp;million during the six months ended June&nbsp;30, 2010.
Smith UK was not obligated to Tanfield for these management fees after December&nbsp;31, 2010 and, accordingly no expense was recognized under this obligation during the six months ended
June&nbsp;30, 2011. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-38</FONT></P>

<HR NOSHADE>
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</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp.  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)  </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND
2010 IS UNAUDITED.)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (15) Related Party Transactions (Continued)  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The net balance that we owe Tanfield on a combined basis appears as a payable to Tanfield on the combined balance sheet, and as of December&nbsp;31, 2010 and 2009 amounted to
$5.7&nbsp;million and $6.3&nbsp;million, respectively. On January&nbsp;1, 2011, as part of our purchase of certain assets of Smith UK from Tanfield, the balance payable under this arrangement
was included as part of the purchase price. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective
January&nbsp;1, 2011, we entered into a six-month Transition Services Agreement with Tanfield for certain administrative services related to our acquisition of
Smith UK. Total transition fees paid or payable under this agreement amounted to approximately $112,000 during the six months ended June&nbsp;30, 2011. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
December 2009, we entered into a services agreement with our Chairman under which we issued to him 1,998,800 shares of Smith US common stock and pay him GBP 4,000 per month in
return for his services as a director and to advance our business, primarily through identifying new technology and product portfolio extension opportunities. During 2010, we paid our Chairman
approximately $71,000 pursuant to this services agreement. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
December 2009, we entered into a services agreement with Tooling Edge,&nbsp;LLC, a company owned by the brother of our President and Chief Executive Officer. Tooling Edge
provides consulting related to the business of developing, manufacturing, assembling, selling and servicing electric vehicles. During 2010, we paid Tooling Edge approximately $85,000 for services
provided and reimbursement of expenses incurred. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Smith UK Acquisition  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January&nbsp;1, 2011, Smith US acquired certain of the assets and liabilities of Smith UK, including the Smith brand, Smith
UK's zero-emission vehicle know-how and technology, the License Agreement, and Smith UK's maintenance division from Tanfield. On analysis of the transaction, we concluded that
the acquisition of certain of the assets and liabilities of Smith UK by Smith US represented a combination of entities under the common control and, accordingly, we accounted for this transaction in a
manner similar to the pooling-of-interest method. See Note&nbsp;1, "Nature of Business and Presentation" for additional information about this acquisition and the accounting
for the acquisition. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management
believes that this acquisition will provide us with a platform on which we can expand our business internationally and will also enhance our product development capabilities
as a result of access to Smith UK's engineering division. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
total purchase price for Smith UK was $15.0&nbsp;million, of which $750,000 was due at closing with the remainder payable in 19 equal monthly installments. The amount due at
closing was primarily settled through an offset to amounts due from Tanfield. The unpaid portion of the purchase price bears interest at a rate of 4.0% in excess of the base rate established by
Barclays Bank&nbsp;PLC from time to time. As of June&nbsp;30, 2011, we owed Tanfield $8.1&nbsp;million, which includes the $8.0&nbsp;million balance of the purchase price and accrued interest,
and $0.1&nbsp;million owed to Tanfield under a transitional services agreement we entered into in connection with the acquisition. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-39</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<A NAME="page_fu78101_1_40"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND
2010 IS UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (15) Related Party Transactions (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
the acquisition was a transaction of entities under common control, all assets and liabilities acquired continue to be recorded at their historical carrying value, we did not
recognize any identifiable intangible assets, and the excess purchase price of $10.3&nbsp;million was recorded as a distribution to Tanfield. The excess purchase price is deductible in the U.K. over
a 25&nbsp;year period. The assets and liabilities acquired have previously been recorded as assets and liabilities on our combined balance sheet as of December&nbsp;31, 2010. The certain assets
and liabilities not acquired, consisting primarily of approximately $2.2&nbsp;million of trade receivables and $7.0&nbsp;million of payable to Tanfield, were included on our combined balance sheet
as of December&nbsp;31, 2010 and were then derecognized as of the January&nbsp;1, 2011 acquisition date. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Tanfield production facility agreement  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Through Smith Europe, we occupy our 80,000 square foot production facility in Washington, Tyne and Wear, England from Tanfield pursuant
to a license to occupy dated January&nbsp;1, 2011. Tanfield leases the entire 250,000 square foot facility from a third party. Smith Europe pays a fee of &pound;23,500, or approximately
$36,500, plus certain property related costs per month to occupy space at the facility and we guarantee Smith Europe's obligations under the agreement. The facility agreement expires on
December&nbsp;31, 2013 unless terminated earlier in accordance with its terms. Total rent and property costs paid or payable under this agreement amounted to approximately $408,000 during the six
months ended June&nbsp;30, 2011 (unaudited). </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (16) Information about Segments and Geographic Areas  </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> Segment information  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Operating segments are components of an enterprise about which discrete financial information is available that is evaluated regularly
by the chief operating decision maker in determining how to allocate resources and assess performance. This evaluation is based on our current structure including the acquisition of Smith UK and all
financial statement periods are reflected on that basis. Based on this evaluation, we have determined that we have two operating segments: Zero Emission Vehicles and Maintenance Services. The Zero
Emission Vehicles segment represents the sale of vehicles we assemble. The Maintenance Services segment represents our activities in connection with the servicing of diesel and electric engines for
customers in the United Kingdom and the sale and lease of forklifts. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
measure our segments' performance based on segment income (loss). Segment income (loss) is comprised of the segment gross loss as well as selling, general and administrative costs
directly attributable to the segment. In management's evaluation of performance, certain costs, such as compensation for administrative staff and executive management, are not allocated by segment
and, accordingly, the following segment results do not include such unallocated costs. Assets reported within a segment are those assets that can be identified to a segment and primarily consist of
inventories, accounts receivables, property, plant and equipment and certain other assets. Cash and cash equivalents and certain other assets are not allocated to our segments. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-40</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=2,SEQ=210,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=855139,FOLIO='F-40',FILE='DISK126:[11ZDO1.11ZDO78101]FU78101A.;12',USER='MPIEROR',CD=';9-NOV-2011;18:49' -->
<A NAME="page_fu78101_1_41"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND
2010 IS UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (16) Information about Segments and Geographic Areas (Continued) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following
is a summary of segment information for the years ended December&nbsp;31, 2010, 2009, and 2008 and the six months ended June&nbsp;30, 2011 and 2011 (unaudited) (in
thousands). Intersegment revenue relates primarily to the sale of parts by the Zero Emission Vehicles segment to the Maintenance Services segment and to the provision of services by the Maintenance
Services segment on behalf of the Zero Emission Vehicles segment. Intersegment parts and services are provided at cost. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> Year ended December&nbsp;31, 2010  </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Zero Emission<BR>
Vehicles </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Maintenance<BR>
Services </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Revenue from external customers</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>21,783</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13,811</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>35,594</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Intersegment revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,783</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,789</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,572</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>547</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>288</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>835</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Segment (loss)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(15,083</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(699</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(15,782</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Segment assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>22,606</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,800</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>25,406</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Segment capital expenditures</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,403</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>159</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,562</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="fu78101_year_ended_december_31,_2009"> </A>
<A NAME="toc_fu78101_1"> </A>
<BR></FONT><FONT SIZE=2><B>  Year ended December&nbsp;31, 2009    <BR>    </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


</FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Zero Emission<BR>
Vehicles </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Maintenance<BR>
Services </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Revenue from external customers</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,045</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>17,809</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>22,854</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Intersegment revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,502</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,152</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,654</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>240</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>299</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>539</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Segment (loss) income</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(10,192</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>902</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(9,290</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Segment assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,754</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,274</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12,028</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Segment capital expenditures</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>314</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>314</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> Year ended December&nbsp;31, 2008  </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Zero Emission<BR>
Vehicles </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Maintenance<BR>
Services </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Revenue from external customers</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8,597</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>23,777</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>32,374</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Intersegment revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>444</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>545</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>989</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>89</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>344</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>433</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Segment (loss) income</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(20,419</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>994</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(19,425</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Segment capital expenditures</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>228</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>143</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>371</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-41</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=3,SEQ=211,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=185174,FOLIO='F-41',FILE='DISK126:[11ZDO1.11ZDO78101]FU78101A.;12',USER='MPIEROR',CD=';9-NOV-2011;18:49' -->
<A NAME="page_fu78101_1_42"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND
2010 IS UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (16) Information about Segments and Geographic Areas (Continued) </B></FONT></P>
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> Six months ended June&nbsp;30, 2011 (unaudited)  </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Zero Emission<BR>
Vehicles </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Maintenance<BR>
Services </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Revenue from external customers</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>30,983</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6,619</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>37,602</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Intersegment revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>653</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,367</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,020</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>380</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>157</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>537</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Segment (loss) income</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(12,621</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(495</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(13,116</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Segment assets</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>23,122</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,480</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>25,602</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Segment capital expenditures</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,485</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>58</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,543</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> Six months ended June&nbsp;30, 2010 (unaudited)  </B></FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="69pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="61pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Zero Emission<BR>
Vehicles </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Maintenance<BR>
Services </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Total </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Revenue from external customers</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8,249</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>7,575</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15,824</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Intersegment revenue</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,034</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,448</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,482</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Depreciation and amortization</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>187</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>145</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>332</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Segment (loss) income</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(4,941</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(107</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>(5,048</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Segment capital expenditures</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>360</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>127</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>487</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following
is a reconciliation of our segment (loss) to net loss before income taxes (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="50pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="44pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Segment (loss)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(15,782</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,290</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(19,425</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(13,116</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(5,048</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Selling, general and administrative&#151;corporate and unallocated</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,085</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(7,452</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,885</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3,545</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(2,503</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Interest expense</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(3,699</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(696</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,881</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,225</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Loss on extinguishment of debt</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(971</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Other expense, net</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,698</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(60</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(1,763</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(745</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Net loss</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(30,264</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(17,498</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(22,310</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(21,276</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>(9,521</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>)</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following
are total assets by segment (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total for reportable segments</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>25,406</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12,028</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>25,602</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Corporate and unallocated</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,917</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,306</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12,792</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>30,323</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>16,334</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>38,394</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-42</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=4,SEQ=212,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=951365,FOLIO='F-42',FILE='DISK126:[11ZDO1.11ZDO78101]FU78101A.;12',USER='MPIEROR',CD=';9-NOV-2011;18:49' -->
<A NAME="page_fu78101_1_43"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND
2010 IS UNAUDITED.) </B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (16) Information about Segments and Geographic Areas (Continued) </B></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following
is a reconciliation of our capital expenditures by segment (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total for reportable segments</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,562</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>314</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>371</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,543</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>487</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Corporate and unallocated</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>100</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>490</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>153</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>164</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>325</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,662</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>804</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>524</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,707</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>812</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following
is a reconciliation of our depreciation and amortization expense by segment (in thousands): </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="30pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total for reportable segments</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>835</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>539</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>433</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>537</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>332</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Corporate and unallocated</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>288</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>303</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>394</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>206</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>148</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,123</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>842</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>827</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>743</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>480</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B><I> Geographic regions  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information regarding our geographic regions is presented in the tables below (in thousands). Revenue by geography is based on the
location the vehicle is assembled or the service is provided. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><I> Revenue  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=8 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>United States</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>13,975</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>176</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>25,464</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,892</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>United Kingdom</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>21,619</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>22,678</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>32,374</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>12,138</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>11,932</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>35,594</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>22,854</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>32,374</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>37,602</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15,824</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-43</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
<!-- ZEQ.=5,SEQ=213,EFW="2206090",CP="SMITH ELECTRIC VEHICLES CORP.",DN="1",CHK=490804,FOLIO='F-43',FILE='DISK126:[11ZDO1.11ZDO78101]FU78101A.;12',USER='MPIEROR',CD=';9-NOV-2011;18:49' -->
<A NAME="page_fu78101_1_44"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND
2010 IS UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (16) Information about Segments and Geographic Areas (Continued) </B></FONT></P>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><I> Long-lived Assets  </I></FONT></P>
 <DIV style="padding:0pt;position:relative;width:60%;margin-left:20%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="39pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="58pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>December&nbsp;31, </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>United States</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,316</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,395</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,478</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>United Kingdom</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,715</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>2,211</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>1,622</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>4,031</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3,606</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>5,100</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B> (17) Significant Customers  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following is a summary of revenue, as a percent of combined revenue, by major customer: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


<!-- COMMAND=ADD_TABLEWIDTH,"100%" -->


 </FONT></P>

<!-- User-specified TAGGED TABLE -->
<DIV ALIGN="CENTER"><TABLE width="100%"  BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR><!-- TABLE COLUMN WIDTHS SET -->
<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="25pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="65pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<!-- TABLE COLUMN WIDTHS END --></TR>

<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2010 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2009 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>2008 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>June&nbsp;30, 2011 </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="LEFT" style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;"><FONT SIZE=1><B>(Unaudited)</B></FONT><BR></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Customer A&#151;Zero Emission Vehicles</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>16</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Customer B&#151;Maintenance Services</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>15</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>32</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>33</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>6</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Customer C&#151;Maintenance Services</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>17</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>3</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Customer D&#151;Zero Emission Vehicles</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>8</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&#151;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>56</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:solid #000000 1.0pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>47</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>49</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>41</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>71</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR style="font-size:1.5pt;" VALIGN="TOP">
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
<TD COLSPAN=2 ALIGN="RIGHT" VALIGN="BOTTOM" style="font-family:times;border-bottom:double #000000 2.25pt;">&nbsp;</TD>
<TD VALIGN="BOTTOM" style="font-family:times;">&nbsp;</TD>
</TR>
</TABLE></DIV>
<!-- end of user-specified TAGGED TABLE -->
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts
receivable from these customers, as a percent of total accounts receivable, amounted to 40%, 20% and 37% as of December&nbsp;31, 2010, December&nbsp;31, 2009 and
June&nbsp;30, 2011, respectively. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B> (18) Subsequent Events  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Senior note financing  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On September&nbsp;14, 2011, we issued a $2.8&nbsp;million senior unsecured note, or the senior note, to one of our existing
stockholders. The senior note accrued interest at 8.00% per annum and had a maturity date of December&nbsp;31, 2011. We exchanged this note in connection with our 2011 convertible notes financing
discussed below. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> 2011 convertible notes financing  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between October&nbsp;7, 2011 and October&nbsp;31, 2011, we issued and sold in a private placement senior unsecured convertible
promissory notes, or 2011 convertible notes, and seven-year warrants to purchase 726,960 shares of our common stock to 31 investors for aggregate proceeds of $30.0&nbsp;million,
consisting of cash proceeds of $25.2&nbsp;million, cancellation of the $2.8&nbsp;million of indebtedness under the senior note and the conversion of approximately $2.0&nbsp;million of the
outstanding balance of the purchase price we owe to Tanfield in connection with the acquisition of our Smith UK business. Each convertible note had a maturity date that was three years from its date
of issuance and accrued interest at a per annum rate of 8.50%, 12.00% and 15.00% for the first, second and third year of its term, respectively. The </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-44</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B><BR>
Smith Electric Vehicles Corp. </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued) </B></FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B> (AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND
2010 IS UNAUDITED.) </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> (18) Subsequent Events (Continued) </B></FONT></P>

<BR>

<P style="font-family:times;"><FONT SIZE=2>2011
convertible notes converted into shares of our Series&nbsp;C convertible redeemable preferred stock, par value $0.001 per share, or the Series&nbsp;C preferred stock, upon our receipt of
$30.0&nbsp;million of proceeds from the 2011 convertible notes financing. Each warrant is exercisable at any time for the number of shares of our common stock equal to 30% of the initial principal
amount of the related note divided by the exercise price of $12.38 and is automatically exercised on a net exercise basis upon the pricing of an initial public offering of our common stock. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2><B><I> Series&nbsp;C preferred stock issuance  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Between November&nbsp;3, 2011 and November&nbsp;8, 2011, we issued 2,431,170 shares of our Series&nbsp;C preferred stock in
connection with the conversion of all of our outstanding 2011 convertible notes. We did not receive any additional cash proceeds upon the conversion of the 2011 convertible notes into Series&nbsp;C
preferred stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Name change and increase in authorized capital  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During November 2011, the company name was changed from "Smith Electric Vehicles US&nbsp;Corp." to "Smith Electric
Vehicles&nbsp;Corp." We also increased the number of authorized common shares from 20.0&nbsp;million to 200.0&nbsp;million and increased the number of authorized preferred shares from
6.6&nbsp;million to 7.3&nbsp;million. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Warrant cancellation  </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During November 2011, we and Tanfield agreed to cancel the warrant under which Tanfield had the right to acquire additional shares of
common stock. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B><I> Stock option grants  </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subsequent to June&nbsp;30, 2011, we granted options, primarily to our employees, to purchase an aggregate of approximately 940,000
shares of or common stock with an exercise price in the range of $12.04 to $12.38 per share. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B> Evaluation Period  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have evaluated subsequent events from January&nbsp;1, 2011 through November&nbsp;9, 2011. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>F-45</FONT></P>

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</FONT> <FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><B>
<IMG SRC="g662227.jpg" ALT="GRAPHIC" WIDTH="325" HEIGHT="216">
  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B>Until&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011
(25&nbsp;days after commencement of this offering), all dealers that buy, sell, or trade shares of our
common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or subscriptions.</B></FONT></P>

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<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ja78101_part_ii_information_not_required_in_prospectus"> </A>
<A NAME="toc_ja78101_1"> </A>
<BR></FONT><FONT SIZE=2><B>  PART II<BR>  INFORMATION NOT REQUIRED IN PROSPECTUS    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="ja78101_item_13._other_expense__ja701990"> </A>
<A NAME="toc_ja78101_2"> </A></FONT> <FONT SIZE=2><B>  Item&nbsp;13.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Other Expenses of Issuance and Distribution.    <BR>    </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set forth below are the expenses (other than underwriting discounts and commissions) expected to be incurred by the registrant in
connection with the issuance and distribution of the securities registered hereby. With the exception of the Securities and Exchange Commission, or SEC, registration fee, the Financial Industry
Regulatory Authority, or FINRA, filing fee and The Nasdaq Global Market listing fee, the amounts set forth below are estimates. </FONT></P>
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<TD WIDTH="" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
<TD WIDTH="7pt" ALIGN="RIGHT" style="font-family:times;"></TD>
<TD WIDTH="45pt" style="font-family:times;"></TD>
<TD WIDTH="12pt" style="font-family:times;"></TD>
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<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>SEC registration fee</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>14,325</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>FINRA filing fee</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>13,000</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Nasdaq Global Market listing fee</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Printing and engraving expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Fees and expenses of legal counsel</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Accounting fees and expenses</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Blue sky fees and expenses (including related legal fees)</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Transfer agent and registrar fees</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Miscellaneous</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<TD style="font-family:times;"><FONT SIZE=0>&nbsp;</FONT></TD>
<TD style="font-family:times;"><p style="font-family:times;margin-left:10pt;text-indent:-10pt;"><FONT SIZE=2> </FONT><FONT SIZE=2>Total</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT"  style="font-family:times;"><FONT SIZE=2>$</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>To
be provided by amendment </FONT></DD></DL>
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 <P style="font-family:times;"><FONT SIZE=2><A
NAME="ja78101_item_14._indemnification_of_directors_and_officers."> </A>
<A NAME="toc_ja78101_3"> </A></FONT> <FONT SIZE=2><B>  Item&nbsp;14.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Indemnification of Directors and Officers.    <BR>    </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;102 of the Delaware General Corporation Law, or the DGCL, permits a corporation to eliminate the personal liability of
its directors or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his or her duty of loyalty, failed to act in good faith, engaged
in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal
benefit. Our certificate of incorporation that will be in effect upon the closing of this offering provides that no director shall be personally liable to us or our stockholders for monetary damages
for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the DGCL prohibits the elimination or limitation of liability of
directors for breaches of fiduciary duty. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;145
of the DGCL provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the
request of the corporation in related capacities against expenses (including attorneys' fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by the person in
connection with an action, suit or proceeding to which he or she is or is threatened to be made a party by reason of such position, if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful,
except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all
of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-1</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
by-laws that will be in effect upon the closing of this offering, or our Amended and Restated By-laws, provide that we will indemnify each person who was or
is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in
the right of us) by reason of the fact that he or she is or was, or has agreed to become, our director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer,
partner, employee or trustee, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to as an "Indemnitee"), or by
reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to,
our best interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Amended and Restated By-laws also provide that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of us to procure a judgment
in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, our director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer,
partner, employee or trustee or, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against all expenses (including attorneys' fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such
action, suit or proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, except that
no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such
adjudication but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful,
on the merits or otherwise, he or she will be indemnified by us against all expenses (including attorneys' fees) actually and reasonably incurred by him or her or on his or her behalf in connection
therewith. If we do not assume the defense of any such action or suit, expenses must be advanced to an Indemnitee under certain circumstances. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
Amended and Restated By-laws prohibit us from retroactively amending the by-law provisions discussed above to reduce our indemnification obligations to our
directors, officers, employees and agents thereunder. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
policy is to enter into separate indemnification agreements with each of our directors and officers that provide the maximum indemnity allowed to directors and executive officers by
Section&nbsp;145 of the DGCL and also provide for certain additional procedural protections. These indemnification provisions and the indemnification agreements entered into between us and our
officers and directors may be sufficiently broad to permit indemnification of our officers and directors for liabilities (including reimbursement of expenses incurred) arising under the Securities Act
of 1933. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
maintain a general liability insurance policy which covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as
directors or officers. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain
of our non-employee directors may, through their relationships with their employers, be insured and/or indemnified against certain liabilities in their capacity as
members of our board of directors. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underwriting agreement we will enter into in connection with the offering of common stock being registered hereby provides that the underwriters will indemnify, under certain
conditions, our directors and officers (as well as certain other persons) against certain liabilities arising in connection with such offering. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-2</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
NAME="ja78101_item_15._recent_sales_of_unregistered_securities."> </A>
<A NAME="toc_ja78101_4"> </A></FONT> <FONT SIZE=2><B>  Item&nbsp;15.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Recent Sales of Unregistered Securities.    <BR>    </I></B></FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within the past three years, the registrant has issued and sold the following unregistered securities: </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>(a)&nbsp;&nbsp;&nbsp;Equity Units, Debt and Preferred Stock  </B></FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Between March&nbsp;20, 2009 and January&nbsp;12, 2010, the registrant issued and sold 111.25 units, each consisting of
a Series&nbsp;A 10% secured convertible debenture in the principal amount of $100,000 and 6,666 shares of the registrant's common stock to 36 investors at a purchase price of $100,000 per unit for
aggregate proceeds of $11,125,040. An aggregate of 741,595 shares of common stock were issued in this placement. Each Series&nbsp;A debenture is convertible in connection with a reorganization or
initial public offering of the registrant into the registrant's common stock, par value $0.001 per share, or common stock, on the terms set forth in such Series&nbsp;A debentures. Each holder of a
Series&nbsp;A debenture has the option to convert such debenture upon the closing of the offering contemplated by this registration statement into the number of shares of common stock equal to 100%
of the principal amount of and all accrued and unpaid interest on such debenture divided by 80% of the public offering price of the common stock sold in this offering.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Between March&nbsp;2, 2010 and October&nbsp;30, 2010, the registrant issued and sold 28,300 units consisting of a
convertible promissory bridge note in the principal amount of $500,000 and a two-year warrant to purchase shares of the class of our equity securities into which the bridge notes were
convertible to 26 investors, for aggregate proceeds of $14,150,000. The number of shares for which the warrant could be exercised was 25% of the number of shares into which the bridge note was
convertible. The bridge notes were convertible and the warrants were exercisable in connection with an equity offering pursuant to which the registrant received gross proceeds of at least
$20.0&nbsp;million, or a qualified offering, for shares of the class of equity securities issued in such qualified offering at a price equal to the offering price of such equity securities. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Between January&nbsp;11, 2011 and March&nbsp;7, 2011, the registrant sold an aggregate of 3,239,202.6576 shares of its
Series&nbsp;B convertible redeemable preferred stock, par value $0.001 per share, or Series&nbsp;B preferred stock, to 53 investors at a purchase price of $12.04 per share for aggregate proceeds
of $39.0&nbsp;million.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Between January&nbsp;11, 2011 and March&nbsp;7, 2011, the registrant issued an aggregate of 1,569,804.48 shares of its
Series&nbsp;B preferred stock to the holders of the registrant's convertible promissory bridge notes and related warrants described above upon (i)&nbsp;the conversion of all but approximately
$171,167 (which the registrant paid in cash) of such convertible promissory bridge notes at the conversion price of $12.04 per share and (ii)&nbsp;the cashless exercise of all such warrants. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>On September&nbsp;14, 2011, the registrant issued a $2.8&nbsp;million senior unsecured note, or the senior note, to an
existing stockholder. The senior note accrued interest at 8.00% per annum and had a maturity date of December&nbsp;31, 2011. The senior note was automatically convertible into shares of the
registrant's equity securities immediately prior to the closing of the initial public offering of the registrant's common stock and was redeemable by the registrant upon the closing of a private
placement of equity securities of the registrant that provides the registrant with at least $20.0&nbsp;million in net proceeds.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Between October&nbsp;7, 2011 and October&nbsp;31, 2011, the registrant issued and sold senior unsecured convertible
notes, or 2011 convertible notes, having an aggregate principal amount of $30.0&nbsp;million and seven-year warrants to purchase 726,960 shares of the registrant's common stock to 31
investors for aggregate proceeds of $30.0&nbsp;million. The senior note was exchanged for a convertible note having a principal amount of $2.8&nbsp;million and a warrant to purchase 67,581 </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-3</FONT></P>

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<UL>
<UL>

<P style="font-family:times;"><FONT SIZE=2>shares
of common stock. The aggregate proceeds also consisted of $25.2&nbsp;million and the conversion of approximately $2.0&nbsp;million of the outstanding balance of the purchase price the
registrant owed to Tanfield Group&nbsp;Plc, or Tanfield, in connection with the acquisition of the registrant's Smith UK business. Each convertible note had a maturity date that was three years from
its date of issuance and accrued interest at a per annum rate of 8.50%, 12.00% and 15.00% for the first, second and third year of its term, respectively. Each 2011 convertible note provided for
automatic conversion into shares of the registrant's equity securities upon the earliest to occur of (i)&nbsp;the issuance of 2011 convertible notes resulting in net proceeds to the registrant of at
least $30.0&nbsp;million, in which case the 2011 convertible notes would convert into shares of the registrant's Series&nbsp;C convertible redeemable preferred stock, par value $0.001 per share,
or Series&nbsp;C preferred stock, par value $0.001 per share, or Series&nbsp;C preferred stock, (ii)&nbsp;the first sale of any class of the registrant's equity securities that results in net
proceeds to the registrant, when added to the net proceeds received by the registrant from the issuance and sale of the convertible notes, of at least $30.0&nbsp;million, in which case the 2011
convertible notes would convert into shares of the equity securities issued in such offering, and (iii)&nbsp;the pricing of an initial public offering of the registrant's common stock that results
in net proceeds to the registrant of at least $50.0&nbsp;million. The 2011 convertible notes may be prepaid at any time using cash flow generated from the registrant's operations. Each warrant can
be exercised at any time, for a purchase price of $12.38 per share, for the number of shares of the registrant's common stock equal to 30% of the initial principal amount of the related convertible
note divided by $12.38. Each warrant automatically will be exercised upon the pricing of an initial public offering of common stock, at a purchase price per share equal to the price at which the
common stock is offered to the public in such offering.  </FONT></P>

</UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Between November&nbsp;3, 2011 and November&nbsp;8, 2011, the registrant issued 2,431,170 shares of its Series&nbsp;C
preferred stock in connection with the conversion of all of the registrant's outstanding 2011 convertible notes. The registrant did not receive any additional cash proceeds upon the conversion of the
2011 convertible notes into Series&nbsp;C preferred stock. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B>(b)&nbsp;&nbsp;&nbsp;Common Stock  </B></FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>On January&nbsp;16, 2009, the registrant issued 4,409,549 shares of its common stock to Tanfield as consideration for
the entry by a subsidiary of Tanfield into a license agreement with the registrant.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>On January&nbsp;16, 2009, the registrant issued 3,128,257 shares of its common stock to the registrant's chief executive
officer as consideration for services rendered in connection with the organization of the registrant. Of these shares, 1,998,800 were subject to forfeiture if the executive was not appointed chairman
of the registrant's board of directors on or before December&nbsp;31, 2009 and were forfeited on December&nbsp;18, 2009 upon the appointment of Roy Stanley as chairman.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>On January&nbsp;16, 2009, the registrant issued 664,220 shares of its common stock to the registrant's chief technology
officer as consideration for services rendered in connection with the organization of the registrant.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>On January&nbsp;16, 2009, the registrant issued 797,063 shares of its common stock to Wynston Hill Capital,&nbsp;LLC
as consideration for financial advice and consulting services rendered in connection with the organization of the registrant and development of the registrant's business plan. </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>On December&nbsp;18, 2009, the registrant issued 1,998,800 shares of its common stock to the then-chairman
of the registrant's board of directors as consideration under a services agreement between the registrant and such individual, dated December&nbsp;18, 2009. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-4</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P style="font-family:times;"><FONT SIZE=2><A
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<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>On March&nbsp;12, 2010, the registrant issued 640,468 shares of its common stock to Tanfield upon the cashless exercise
of Tanfield's warrant issued on August&nbsp;5, 2009 and amended December&nbsp;18, 2009, described in paragraph&nbsp;(c) of this Item&nbsp;15. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B>(c)&nbsp;&nbsp;&nbsp;Warrants  </B></FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>On August&nbsp;5, 2009, the registrant issued a five-year warrant to Tanfield, which was amended on
December&nbsp;18, 2009. As amended, the warrant provided Tanfield with the right to purchase a number of shares of the registrant's common stock equal to 49% of (i)&nbsp;the number of shares of
common stock issued and vested pursuant to the registrant's 2009 Incentive Compensation Plan, (ii)&nbsp;the number of shares of common stock issued to the investors in the registrant's
series&nbsp;A financing for amounts invested between $7.5&nbsp;million and $10.0&nbsp;million, (iii)&nbsp;the number of shares of common stock issued to the investors in the registrant's
series&nbsp;A financing for amounts invested between $10.0&nbsp;million and $15.0&nbsp;million, provided that such amounts were invested on or prior to August&nbsp;7, 2009, and (iv)&nbsp;the
number of shares of common stock issued to Roy Stanley pursuant to his services agreement with the registrant. The warrant had an exercise price of $0.01 per share and was exercisable on a cashless
basis. The registrant and Tanfield terminated this warrant effective November&nbsp;4, 2011. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B>(d)&nbsp;&nbsp;&nbsp;Options  </B></FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>On December&nbsp;18, 2009, the registrant granted to certain of its executive officers options to purchase an aggregate
of 513,376 shares of its common stock in accordance with incentive stock option agreements that the registrant entered into with such officers. Each of these options has an exercise price of $0.73 per
share.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>On April&nbsp;29, 2011, the registrant granted to certain of its officers and certain officers of its subsidiary options
to purchase an aggregate of 458,000 shares of its common stock in accordance with non-qualified stock option agreements that the registrant entered into with such officers. Each of these
options has an exercise price of $12.04 per share. The options will vest upon the date specified in each officer's non-qualified stock option agreement, each date being between
November&nbsp;22, 2012 and March&nbsp;8, 2013, or immediately upon a change of control of the registrant or the completion of the offering contemplated by this registration statement or the
existence of good reason as defined in the applicable award agreement.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>On July&nbsp;20, 2011, the registrant granted to its vice president of global operations an option to purchase 128,000
shares of its common stock in accordance with a non-qualified stock option agreement that the registrant entered into with such officer. This option has an exercise price of $12.04 per
share, and will vest on May&nbsp;13, 2013 or immediately upon a change of control of the registrant or the completion of the offering contemplated by this registration statement or the existence of
good reason as defined in the applicable award agreement.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Between November&nbsp;5, 2011 and November&nbsp;8, 2011, the registrant granted to certain of its suppliers options to
purchase an aggregate of 80,000 shares of its common stock in accordance with non-qualified stock option agreements that the registrant entered into with such vendors and consultant. Each
of these options has an exercise price of $12.38 per share. The options will vest upon the date specified in each non-qualified stock option agreement, or immediately upon a change of
control of the registrant or the completion of the offering contemplated by this registration statement.  </FONT> <FONT SIZE=2>
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>On November&nbsp;4, 2011, the registrant granted to certain of its executive officers options to purchase an aggregate
of 730,000 shares of its common stock in accordance with a non-qualified stock option agreement that the registrant entered into with each such officer. Each option has an exercise price
of $12.38 per share and will vest as to 50% of the shares of common stock </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-5</FONT></P>

<HR NOSHADE>
<P style='font-family:times;page-break-before:always'></p>
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<P style="font-family:times;"><FONT SIZE=2><A
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<UL>
<UL>

<P style="font-family:times;"><FONT SIZE=2>covered
by the option on November&nbsp;4, 2012 and as to the remaining 50% of the covered shares on November&nbsp;4, 2013. Vesting of the options will accelerate upon a change in control of the
registrant or the existence of good reason as defined in the applicable award agreement. </FONT></P>

</UL>
</UL>

<P style="font-family:times;"><FONT SIZE=2><B>(e)&nbsp;&nbsp;&nbsp;Restricted Stock  </B></FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>On April&nbsp;29, 2011, the registrant granted to certain of its officers 126,777 restricted shares of its common stock
in accordance with restricted stock agreements that the registrant entered into with such officers. These restricted shares of common stock will vest in November 2012, or immediately upon a change of
control of the registrant or the completion of the offering contemplated by this registration statement or the existence of good reason as defined in the applicable award agreement. </FONT></DD></DL>
</UL>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
securities described in paragraphs&nbsp;(a), (b)&nbsp;and (c)&nbsp;of this Item&nbsp;15 were issued in reliance on the exemption provided by Section&nbsp;4(2) of the
Securities Act of 1933 and, in certain cases, in reliance on Regulation&nbsp;D and Regulation&nbsp;S promulgated thereunder, as transactions by an issuer not involving a public offering. The
purchasers of the securities in these transactions represented that they were accredited investors and that they were acquiring the securities for investment purposes only and not with a view toward
the public sale or distribution thereof. Such purchasers received written disclosures that the securities had not been registered under the Securities Act of 1933, as amended, and that any resale must
be made pursuant to a registration statement or an available exemption from registration. All purchasers either received adequate financial statement or non-financial statement information
about the registrant or had adequate access, through their relationship with the registrant, to financial statement or non-financial statement information about the registrant. The sale of
these securities was made without general solicitation or advertising. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
securities described in paragraphs&nbsp;(d) and (e)&nbsp;of this Item&nbsp;15 were issued pursuant to written compensatory plans or arrangements with our employees, directors
and consultants in reliance on the
exemption provided by Section&nbsp;4(2) of the Securities Act of 1933 or on the exemption provided by Section&nbsp;3(b) of the Securities Act of 1933 and Rule&nbsp;701 promulgated thereunder. </FONT></P>


<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
securities described in this Item&nbsp;15 are deemed restricted securities for purposes of the Securities Act. The instruments representing such issued securities included
appropriate legends setting forth that the securities had not been registered and the applicable restrictions on transfer. There were no underwriters employed in connection with any of the
transactions set forth in this Item&nbsp;15.  </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="ja78101_item_16._exhibits_and_financial_statement_schedules"> </A>
<A NAME="toc_ja78101_5"> </A></FONT> <FONT SIZE=2><B>  Item&nbsp;16.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Exhibits and Financial Statement Schedules    <BR>    </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2><B>(A)&nbsp;&nbsp;Exhibits  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following documents are filed as exhibits to this registration statement: </FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Exhibit<BR>
Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Description </B></FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Form of Underwriting Agreement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>2.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Business Purchase Agreement, dated January&nbsp;1, 2011, among the Registrant, Smith Electric Vehicles Europe Limited, SEV Group Limited, Tanfield Engineering Systems Limited, Norquip Limited and Tanfield
Group&nbsp;Plc</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Third Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Certificate of Amendment to Third Amended and Restated Certificate of Incorporation of the Registrant, effective November&nbsp;4, 2011</FONT></TD>
</TR>
</TABLE></DIV>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-6</FONT></P>

<HR NOSHADE>
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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>
 <DIV style="padding:0pt;position:relative;width:80%;margin-left:10%;">
<p style="font-family:times;"><font size=1></FONT><FONT SIZE=2>


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<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Exhibit<BR>
Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Description </B></FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>3.3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Form of Fourth Amended and Restated Certificate of Incorporation of the Registrant, to be effective upon the closing of the offering</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.4</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>By-Laws of the Registrant, as currently in effect</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Amended and Restated By-Laws of the Registrant, to be effective upon the closing of the offering</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Specimen common stock certificate of the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amended and Restated Investor Rights Agreement, dated as of November&nbsp;3, 2011, between Registrant and certain holders of the Registrant's capital stock named therein</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Rights Plan, dated&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011, between the Registrant and</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>5.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Opinion of Covington&nbsp;&amp; Burling&nbsp;LLP</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Indemnification Agreement between the Registrant and its Officers and Directors</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>2009 Incentive Compensation Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Non-Qualified Option Agreement under 2009 Incentive Compensation Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.4</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Restricted Stock Agreement under 2009 Incentive Compensation Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Non-Qualified Option Agreement outside 2009 Incentive Compensation Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.6</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Non-Qualified Option Agreement outside 2009 Incentive Compensation Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.7</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>2012 Incentive Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.8</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Incentive Stock Option Agreement under 2012 Incentive Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.9</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Nonstatutory Stock Option Agreement under 2012 Incentive Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.10</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Employment Agreement, dated November&nbsp;2, 2011, between the Registrant and Bryan Hansel</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.11</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Employment Agreement, dated November&nbsp;1, 2009, between the Registrant and Kevin Kelly</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.12</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Employment Agreement, dated September&nbsp;14, 2011, between the Registrant and Kevin Neal</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.13</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Employment Agreement, dated September&nbsp;14, 2011, between the Registrant and Jacques&nbsp;D. Schira</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.14</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Employment Agreement, dated September&nbsp;14, 2011, between the Registrant and Paul&nbsp;R. Geist</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.15</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Employment Agreement, dated September&nbsp;14, 2011, between the Registrant and Angela Strand Boydston.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.16</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Employment Agreement, dated November&nbsp;8, 2011, between Smith Electric Vehicles Europe Limited and Robin Mackie.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.17</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Production Space Lease, dated March&nbsp;12, 2009, between the Registrant and Kansas City, Missouri</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.18</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Office Lease, dated March&nbsp;12, 2009, by and between the Registrant and Kansas City, Missouri</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.19</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>License to Occupy, dated as of January&nbsp;1, 2011, between Smith Electric Vehicles Europe Limited and Tanfield Group&nbsp;Plc</FONT></TD>
</TR>
</TABLE></DIV>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-7</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>
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<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Exhibit<BR>
Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Description </B></FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10.20</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>*&#134;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Supply Agreement, dated October&nbsp;7, 2010, between the Registrant and AVIA Ashok Leyland Motors s.r.o.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.21</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*&#134;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Product Sales Agreement, effective as of March&nbsp;16, 2011, between the Registrant and A123 Systems,&nbsp;Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.22</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*&#134;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Development, Supply, and License Agreement, dated September&nbsp;30, 2010, between the Registrant and Impact Clean Power Technology&nbsp;S.A., formerly Clean Power Technical Solutions Sp. z.o.o.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.23</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*&#134;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Licensing and Manufacturing Agreement, dated November&nbsp;5, 2011, between the Registrant and Magnetic Systems Technology Limited</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.24</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*&#134;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Development, Supply, and License Agreement, dated January&nbsp;1, 2011, between the Registrant and Sensor-Technik UK&nbsp;Ltd.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.25</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Assistance Agreement, dated April&nbsp;1, 2010, between the Registrant and the United States Department of Energy/NETL Morgantown Campus</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.26</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*&#134;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Fleet Maintenance Agreement, dated October&nbsp;13, 2005, between Smith Electric Vehicles Europe Limited (as successor-in-interest to SEV Group&nbsp;Ltd) and Dairy Crest Limited</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>21.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>List of subsidiaries of the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>23.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Consent of Deloitte&nbsp;&amp; Touche&nbsp;LLP</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>23.2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Consent of Deloitte&nbsp;LLP</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>23.3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Consent of Covington&nbsp;&amp; Burling&nbsp;LLP (contained in Exhibit&nbsp;5.1)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>24.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Powers of Attorney (included on signature pages of this Registration Statement)</FONT></TD>
</TR>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>To
be filed by amendment
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#134;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Portions
of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment
request under Rule&nbsp;406 of the Securities Act of 1933, as amended. </FONT></DD></DL>
 </DIV>
 <P style="font-family:times;"><FONT SIZE=2><B>(B)&nbsp;&nbsp;Financial Statement Schedules  </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All schedules are omitted because they are not applicable or the required information is included in the financial statements or notes thereto. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2><A
NAME="ja78101_item_17._undertakings."> </A>
<A NAME="toc_ja78101_6"> </A></FONT> <FONT SIZE=2><B>  Item&nbsp;17.&nbsp;&nbsp;&nbsp;&nbsp;</B></FONT><FONT SIZE=2><B><I>Undertakings.    <BR>    </I></B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being
registered, the registrant will, unless </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-8</FONT></P>

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<A NAME="page_ja78101_1_9"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
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<BR>

<P style="font-family:times;"><FONT SIZE=2>in
the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of such issue. </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
undersigned registrant hereby undertakes that: </FONT></P>

<UL>
<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>For
purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule&nbsp;430A and contained in a form of prospectus filed by the registrant pursuant to Rule&nbsp;424(b) (1)&nbsp;or (4)&nbsp;or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>For
the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus
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. </FONT></DD></DL>
</UL>
<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-9</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="jc78101_signatures"> </A>
<A NAME="toc_jc78101_1"> </A>
<BR></FONT><FONT SIZE=2><B>  SIGNATURES    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, Smith Electric Vehicles Corp. has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Kansas City, State of Missouri, on the 9th day of November,&nbsp;2011. </FONT></P>
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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=3 style="font-family:times;"><FONT SIZE=2> SMITH ELECTRIC VEHICLES CORP.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>  By</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="BOTTOM" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;BRYAN L. HANSEL<BR>


<HR NOSHADE SIZE="1.0pt" WIDTH="100%" COLOR="#000000">

</FONT> <FONT SIZE=2> Name:&nbsp;&nbsp;Bryan L. Hansel<BR>
Title:&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><I>Chief Executive Officer</I></FONT></TD>
</TR>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="jc78101_power_of_attorney"> </A>
<A NAME="toc_jc78101_2"> </A>
<BR></FONT><FONT SIZE=2><B>  POWER OF ATTORNEY    <BR>    </B></FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Bryan&nbsp;L. Hansel,
Paul&nbsp;R. Geist and Jacques&nbsp;D. Schira, and each of them severally, his true and lawful attorney or attorneys-in-fact and agents, with full power to act with or
without the others and with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same, with all supplements and exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents and each of them, full power and authority to do and perform in the name of on behalf of the
undersigned, in any and all capacities, each and every act and thing necessary or desirable to be done in and about the premises, to all intents and purposes and as fully as they might or could do in
person, hereby ratifying, approving and confirming all that said attorneys-in-fact and agents or their substitutes may lawfully do or cause to be done by virtue hereof. </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>*
* * * </FONT></P>

<P style="font-family:times;"><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 dates indicated. </FONT></P>
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<TH NOWRAP  ALIGN="CENTER" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:34pt;"><FONT SIZE=1><B>Signature

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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH NOWRAP  ALIGN="CENTER" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:17pt;"><FONT SIZE=1><B>Date


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 </B></FONT></DIV></TH>
</TR>
<TR VALIGN="TOP">
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>/s/&nbsp;BRYAN L. HANSEL<BR>


<HR NOSHADE SIZE="1.0pt" WIDTH="100%" COLOR="#000000">

</FONT> <FONT SIZE=2> Bryan L. Hansel</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>Chief Executive Officer and Director<BR>
(Principal Executive Officer)</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>November&nbsp;9, 2011</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;PAUL R. GEIST<BR>


<HR NOSHADE SIZE="1.0pt" WIDTH="100%" COLOR="#000000">

</FONT> <FONT SIZE=2> Paul R. Geist</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>Chief Financial Officer<BR>
(Principal Financial Officer)</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>November&nbsp;9, 2011</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;DOUGLAS FLEMING<BR>


<HR NOSHADE SIZE="1.0pt" WIDTH="100%" COLOR="#000000">

</FONT> <FONT SIZE=2> Douglas Fleming</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>Controller<BR>
(Principal Accounting Officer)</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>November&nbsp;9, 2011</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;JOHN N. BRIDGE<BR>


<HR NOSHADE SIZE="1.0pt" WIDTH="100%" COLOR="#000000">

</FONT> <FONT SIZE=2> John N. Bridge</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>Director</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>November&nbsp;9, 2011</FONT></TD>
</TR>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-10</FONT></P>

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<TH NOWRAP  ALIGN="CENTER" style="font-family:times;"><DIV style="border-bottom:solid #000000 1.0pt;margin-bottom:0pt;width:34pt;"><FONT SIZE=1><B>Signature

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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
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<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
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<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
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<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>/s/&nbsp;ROBERT J. DRUTEN<BR>


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</FONT> <FONT SIZE=2> Robert J. Druten</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>Director</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>November&nbsp;9, 2011</FONT></TD>
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<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;DARREN KELL<BR>


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</FONT> <FONT SIZE=2> Darren Kell</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>Director</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>November&nbsp;9, 2011</FONT></TD>
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<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;ROBIN J. MACKIE<BR>


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</FONT> <FONT SIZE=2> Robin J. Mackie</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>Chief Technology Officer and Director</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>November&nbsp;9, 2011</FONT></TD>
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<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>/s/&nbsp;THOMAS T. STALLKAMP<BR>



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</FONT> <FONT SIZE=2> Thomas T. Stallkamp</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>Director</FONT></TD>
<TD VALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="CENTER" VALIGN="CENTER" style="font-family:times;"><BR><FONT SIZE=2>November&nbsp;9, 2011</FONT></TD>
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 <P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2>II-11</FONT></P>

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<P style="font-family:times;"><FONT SIZE=2>
<A HREF="#bg78101a_main_toc">Table of Contents</A> </FONT></P>

<P ALIGN="CENTER" style="font-family:times;"><FONT SIZE=2><A
NAME="ka78101_exhibit_index"> </A>
<A NAME="toc_ka78101_1"> </A>
<BR></FONT><FONT SIZE=2><B>  EXHIBIT INDEX    <BR>    </B></FONT></P>
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<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Exhibit Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Description </B></FONT></TH>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>1.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>*</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Form of Underwriting Agreement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>2.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Business Purchase Agreement, dated January&nbsp;1, 2011, among the Registrant, Smith Electric Vehicles Europe Limited, SEV Group Limited, Tanfield Engineering Systems Limited, Norquip Limited and Tanfield
Group&nbsp;Plc</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Third Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Certificate of Amendment to Third Amended and Restated Certificate of Incorporation of the Registrant, effective November&nbsp;4, 2011</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Fourth Amended and Restated Certificate of Incorporation of the Registrant, to be effective upon the closing of the offering</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.4</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>By-Laws of the Registrant, as currently in effect</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>3.5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Amended and Restated By-Laws of the Registrant, to be effective upon the closing of the offering</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Specimen common stock certificate of the Registrant</FONT></TD>
</TR>
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<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Amended and Restated Investor Rights Agreement, dated as of November&nbsp;3, 2011, between Registrant and certain holders of the Registrant's capital stock named therein</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>4.3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Rights Plan, dated&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2011, between the Registrant and</FONT></TD>
</TR>
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<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>5.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Opinion of Covington&nbsp;&amp; Burling&nbsp;LLP</FONT></TD>
</TR>
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<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Indemnification Agreement between the Registrant and its Officers and Directors</FONT></TD>
</TR>
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<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>2009 Incentive Compensation Plan</FONT></TD>
</TR>
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<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Non-Qualified Option Agreement under 2009 Incentive Compensation Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.4</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Restricted Stock Agreement under 2009 Incentive Compensation Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.5</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Non-Qualified Option Agreement outside 2009 Incentive Compensation Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.6</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Non-Qualified Option Agreement outside 2009 Incentive Compensation Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.7</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>2012 Incentive Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.8</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Incentive Stock Option Agreement under 2012 Incentive Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.9</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Form of Nonstatutory Stock Option Agreement under 2012 Incentive Plan</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.10</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Employment Agreement, dated November&nbsp;2, 2011, between the Registrant and Bryan Hansel</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.11</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Employment Agreement, dated November&nbsp;1, 2009, between the Registrant and Kevin Kelly</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.12</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Employment Agreement, dated September&nbsp;14, 2011, between the Registrant and Kevin Neal</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.13</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Employment Agreement, dated September&nbsp;14, 2011, between the Registrant and Jacques&nbsp;D. Schira</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.14</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Employment Agreement, dated September&nbsp;14, 2011, between the Registrant and Paul&nbsp;R. Geist</FONT></TD>
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<A NAME="page_ka78101_1_13"> </A>

<P style="font-family:times;"><FONT SIZE=2><A
HREF="#bg78101a_main_toc">Table of Contents</A></FONT></P>
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<TH COLSPAN=2 ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Exhibit Number </B></FONT></TH>
<TH style="font-family:times;"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH ALIGN="CENTER" style="font-family:times;border-bottom:solid #000000 1.0pt;"><FONT SIZE=1><B>Description </B></FONT></TH>
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<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><FONT SIZE=2>10.15</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2>Employment Agreement, dated September&nbsp;14, 2011, between the Registrant and Angela Strand Boydston</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.16</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Employment Agreement, dated November&nbsp;8, 2011, between Smith Electric Vehicles Europe Limited and Robin Mackie</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.17</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Production Space Lease, dated March&nbsp;12, 2009, between the Registrant and Kansas City, Missouri</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.18</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Office Lease, dated March&nbsp;12, 2009, by and between the Registrant and Kansas City, Missouri</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.19</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>License to Occupy, dated as of January&nbsp;1, 2011, between Smith Electric Vehicles Europe Limited and Tanfield Group&nbsp;Plc</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.20</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*&#134;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Supply Agreement, dated October&nbsp;7, 2010, between the Registrant and AVIA Ashok Leyland Motors&nbsp;s.r.o.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.21</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*&#134;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Product Sales Agreement, effective as of March&nbsp;16, 2011, between the Registrant and A123&nbsp;Systems,&nbsp;Inc.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.22</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*&#134;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Development, Supply, and License Agreement, dated September&nbsp;30, 2010, between the Registrant and Impact Clean Power Technology&nbsp;S.A., formerly Clean Power Technical Solutions Sp.&nbsp;z.o.o.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.23</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*&#134;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Licensing and Manufacturing Agreement, dated November&nbsp;5, 2011, between the Registrant and Magnetic Systems Technology Limited</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.24</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*&#134;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Development, Supply, and License Agreement, dated January&nbsp;1, 2011, between the Registrant and Sensor-Technik UK&nbsp;Ltd.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.25</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Assistance Agreement, dated April&nbsp;1, 2010, between the Registrant and the United States Department of Energy/NETL Morgantown Campus</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>10.26</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*&#134;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Fleet Maintenance Agreement, dated October&nbsp;13, 2005, between Smith Electric Vehicles Europe Limited (as successor-in-interest to SEV Group&nbsp;Ltd) and Dairy Crest Limited</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>21.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>List of subsidiaries of the Registrant</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>23.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Consent of Deloitte&nbsp;&amp; Touche&nbsp;LLP</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>23.2</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Consent of Deloitte&nbsp;LLP</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>23.3</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>*</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Consent of Covington&nbsp;&amp; Burling&nbsp;LLP (contained in Exhibit&nbsp;5.1)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD ALIGN="RIGHT" style="font-family:times;"><BR><FONT SIZE=2>24.1</FONT></TD>
<TD style="font-family:times;"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD style="font-family:times;"><BR><FONT SIZE=2>Powers of Attorney (included on signature pages of this Registration Statement)</FONT></TD>
</TR>
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<DL compact>
<DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>To
be filed by amendment
<BR><BR></FONT></DD><DT style='font-family:times;margin-bottom:-11pt;'><FONT SIZE=2>&#134;</FONT></DT><DD style="font-family:times;"><FONT SIZE=2>Portions
of this Exhibit&nbsp;have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential
treatment request under Rule&nbsp;406 of the Securities Act of 1933, as amended. </FONT></DD></DL>
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TABLE OF CONTENTS
INDEX TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
As filed with the Securities and Exchange Commission on November 10, 2011
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Smith Electric Vehicles Corp.
(Exact name of Registrant as specified in its charter)
Delaware
3711
26-4073886
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
12200 N.W. Ambassador Drive
Suite 326
Kansas City, MO 64163
(816) 464-0508
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)
Paul R. Geist
Chief Financial Officer
Smith Electric Vehicles Corp.
12200 N.W. Ambassador Drive
Suite 326
Kansas City, MO 64163
(816) 464-0508
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
W. Andrew Jack, Esq.
Covington & Burling LLP
1201 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
(202) 662-6000
Justin L. Bastian, Esq.
Sandra P. Knox, Esq.
Faie R. Dorin, Esq.
Sidley Austin LLP
1001 Page Mill Road, Building 1
Palo Alto, CA 94304
(650) 565-7000
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this
Registration
Statement becomes effective.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the
following box:
o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and
list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective registration statement for the same offering.
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
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
ý
(Do not check if a smaller
reporting company)
Smaller reporting company
o
Calculation of Registration Fee
Title of Each Class of
Securities to be Registered
Proposed Maximum
Aggregate
Offering Price(1)(2)
Amount of
Registration Fee(2)
Common Stock, $0.001 par value
$125,000,000
$14,325
(1)
Includes
shares issuable upon exercise of the underwriters' over-allotment option.
(2)
Estimated
solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
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 this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
Table of Contents
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and we are not soliciting an offer to buy
these securities, in any jurisdiction where the offer or sale is not permitted.
Subject to Completion dated November 10, 2011
Preliminary Prospectus
[            ] Shares
Common Stock
This is the initial public offering of our common stock. No public market currently exists for our common stock. We are
offering                        
of the shares to be sold in the offering. The selling stockholders identified in this prospectus are offering an
additional                        shares. We will not receive any of the proceeds from the
sale of the shares being sold by the selling stockholders. We expect the public offering price to be between $            and
$            per share.
We
have applied to list our common stock on The Nasdaq Global Market under the symbol "SMTH".
Investing in our common stock involves a high degree of risk. Before buying any shares, you should carefully read the discussion of material risks of investing in
our common stock in "Risk Factors" beginning on page 16 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
Per Share
Total
Public offering price
$
$
Underwriting discounts and commissions
$
$
Proceeds, before expenses, to us
$
$
Proceeds, before expenses, to the selling stockholders
$
$
The
underwriters may also purchase from us and the selling stockholders up to an additional                        shares of our
common stock at the public offering price, less the underwriting
discounts and commissions payable by us, to cover over-allotments, if any, within 30 days from the date of this prospectus. If the underwriters exercise this option in full, the
total underwriting discounts and commissions will be $            , our total proceeds, after underwriting discounts and commissions but before expenses, will be
$            , and the selling
stockholders' total proceeds before expenses will be $            .
Joint Book Running Managers
UBS Investment Bank
BofA Merrill Lynch
Delivery
of the shares will be made on or
about                                    .
Table of Contents
Table of Contents
Table of Contents
Table of Contents
You should rely only on the information contained in this prospectus. We and the underwriters have not authorized anyone to provide you with information different
from that contained in this prospectus. We and the selling stockholders named in this prospectus are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where
offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front cover of this prospectus, or such other dates as are stated in this
prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.
TABLE OF CONTENTS
Conventions that Apply to this Prospectus
i
Prospectus Summary
1
Risk Factors
16
Forward-Looking Statements
42
Use of Proceeds
43
Dividend Policy
44
Capitalization
45
Dilution
47
Selected Historical Financial Data
49
Management's Discussion and Analysis of Financial Condition and Results of
Operations
52
Business
77
Management
107
Executive Compensation
115
Relationships and Related Person Transactions
133
Principal and Selling Stockholders
139
Shares Eligible for Future Sale
141
Description of Capital Stock
144
Material U.S. Federal Income Tax Considerations for Non-U.S.
Holders
151
Underwriting
155
Legal Matters
163
Experts
163
Where You Can Find More Information
163
Index to Combined and Consolidated Financial Statements
F-1
The
"Smith Electric Vehicles" design logo, "Smith," "Smith Electric," "Newton," "Edison," "Smith Power," "Smith Drive," and "Smith Link" and other trademarks or service marks of ours
appearing in this prospectus are our property. This prospectus contains additional trade names, trademarks and service marks of other companies. We do not intend our use or display of other companies'
tradenames, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.
Table of Contents
CONVENTIONS THAT APPLY TO THIS PROSPECTUS
Unless the context otherwise requires, in this prospectus:
•
"Smith," "the Company," "we," "us" and "our" refer to Smith Electric Vehicles Corp. and, for the period following
January 1, 2011, its subsidiary;
•
"Smith Europe" refers to our subsidiary, Smith Electric Vehicles Europe Limited; and
•
"Smith UK" refers to the zero emission vehicles business of Tanfield Group Plc, which was operated by SEV
Group Ltd. and Saxon Specialist Electric Vehicles, a wholly owned subsidiary and division, respectively, of Tanfield Group Plc. We acquired the Smith UK business effective
January 1, 2011. Smith Europe operates the Smith UK business.
Certain
market data presented in this prospectus has been derived from data included in various vehicle industry publications, surveys and forecasts, including those generated by J.D.
Power and Associates. Certain target market sizes presented in this prospectus have been calculated by us (as further described below) based on such data. We have assumed the correctness and
truthfulness of such data, including projections and estimates, when we use them in this prospectus. You should read our cautionary statement in the section entitled "Forward-Looking Statements."
i
Table of Contents
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. To understand this offering fully,
you should read the entire prospectus carefully, including "Risk Factors," "Selected Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and our financial statements and related notes before deciding whether to purchase shares of our common stock.
OUR COMPANY
We design, produce and sell zero emission commercial electric vehicles designed to be a superior performing alternative to traditional
diesel trucks due to higher efficiency and lower total cost of ownership. We believe we are the only vehicle manufacturer selling to major commercial fleets in the United States and Europe that
exclusively produces electric vehicles. Our vehicle designs leverage over 80 years of market knowledge from selling and servicing electric vehicles in
the United Kingdom. This experience has led to the development of our advanced powertrain (Smith Drive™), power management (Smith Power™) and telemetry (Smith
Link™) technologies. We believe that these technologies will drive improved vehicle performance, provide us with increased control over supply chain quality and reduce the upfront cost of
our vehicles.
Unlike
companies that have introduced electric passenger vehicles, we focus on the production and sale of commercial electric vehicles that primarily address the needs of
medium-duty commercial fleet operators with depot-based operations and predictable daily service routes of up to 120 miles. We believe we are the only company focused on producing and
globally offering an all-electric commercial vehicle having a gross vehicle weight, or GVW, between approximately 16,500 and 26,400 pounds (the Smith Newton™). We also
produce the Smith Edison™, which is a lighter duty vehicle than the Newton that is sold in the United Kingdom and in other selected markets worldwide. As part of our continued focus on
product development, we plan to introduce a Newton model that is configured as a step van in the United States in early 2012. Our vehicles feature a battery system that is scalable to meet the varying
range needs of commercial fleets and provide a lower total cost of ownership than that of a conventional diesel vehicle. We believe electric vehicles are ideally suited for the cost conscious
commercial vehicles market because:
•
lower cost per mile
—on a per mile basis electric power to
charge our vehicles costs significantly less than diesel fuel;
•
less volatility
—the cost of electricity is considerably less
volatile than the price of diesel fuel;
•
less maintenance
—electric vehicles require less maintenance
than diesel vehicles due to the fewer number of moving parts in an electric powertrain than in a diesel powertrain;
•
minimal infrastructure requirements
—most commercial vehicles
in our target market operate from the same location and follow specific routes, eliminating the need for distributed charging infrastructure and concerns over limited range; and
•
fuel efficient with low environmental impact
—commercial fleet
operators are under government and popular pressure to improve fuel mileage, cut emissions and reduce noise associated with diesel powered trucks.
Demand
for our vehicles is growing as customers recognize their economic benefits. Additionally, in the near term we believe that governmental and popular support for companies that
purchase environmentally friendly transportation will accelerate demand for our vehicles. Over the twelve months ended September 30, 2011, we sold 320 vehicles, and as of October 31,
2011 we have an order backlog of 120 vehicles and have allocated nearly all of our estimated 540 production slots through July 2012. In addition to the 120 vehicles included in our order
backlog, we have written indications of interest
1
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from
existing and potential customers for approximately 2,220 vehicles for requested delivery spanning the period 2012 through 2015. We are actively involved in discussions with existing and potential
customers on an ongoing basis and expect to continue to allocate additional production slots and increase our order backlog.
We
sell our vehicles through our direct sales force, as well as limited third party distribution agreements. We sell our vehicles to commercial fleet operators across multiple
industries, including food & beverage, utility, telecommunications, retail, grocery, parcel and postal delivery, school transportation, military and government. Our customers include the
following:
Food & Beverage
Utilities
Retail
Grocery
Package Delivery
Military
Our
sales strategy is focused on industry-leading companies and government entities that operate substantial, well-recognized, medium-duty commercial vehicle
fleets and that have the corporate or public commitment and resources to support and sustain the development of the commercial electric vehicle industry. We offer a differentiated approach to
commercial vehicle sales and service that departs from traditional truck sales and service models. Our approach involves a comprehensive plan for the pilot and roll-out of our electric
vehicles, as well as the ongoing replacement of existing commercial vehicles with our electric vehicles, which is tailored to the individual needs of our customers. This plan includes the development
of a multi-year purchasing forecast to help the customer systematically integrate our vehicles into their fleets, as well as analytics that provide the expected economic and environmental
impact of fleet conversion. We believe that our strategy of targeting industry-leading companies and providing them with an individualized sales and service solution has elevated our public profile,
enhanced the credibility of our vehicles in the marketplace and made our customers advocates of our sales approach and our vehicles, all of which enhances our ability to sell vehicles to new
customers.
As
a part of our sales strategy, we separately present to our customers the base vehicle price and the battery system price. We believe that, in most cases, our base vehicle price is
competitive with or a slight premium to the price of a diesel-fueled vehicle with a comparable GVW. Our approach to pricing allows customers to compare the relative merits of a diesel truck's low cost
energy storage system (the fuel tank) and more expensive and volatile energy cost (the per gallon price of diesel fuel) with our vehicle's higher cost energy storage system (the battery) and lower and
more predictable energy cost (the per kilowatt hour price of electricity). We believe these comparisons make our vehicles more attractive to customers than traditional diesel options, particularly
during periods of rising fuel prices, even when the social and environmental benefits of our vehicles are ignored.
We
currently design, produce and sell vehicles based on two platforms, the Smith Newton and the Smith Edison, both of which can be configured for multiple applications. The Newton has a
GVW of approximately 16,500 to 26,400 pounds, a payload capacity of approximately 6,100 to 16,200 pounds and a range of up to 50 to 150 miles depending on vehicle specification
and battery configuration. The Newton, which is sold in the United States and internationally, is used in a wide range of general delivery applications, as well as in specialty applications such as
refrigerated delivery, military transport and boom truck. In November 2011, less than 24 months after the first sale of the Smith Newton in the United States, we introduced a second
generation Newton, which incorporates our Smith Drive, Smith Power and Smith Link technologies. We also are developing a Newton model that will have a GVW of
2
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approximately
33,000 pounds to meet the needs of delivery and transit customers, which we expect to be available in mid-2012.
The
Smith Edison, which is a lighter duty vehicle than the Newton, is sold in the United Kingdom and in other selected markets worldwide. The Edison has a GVW of approximately 7,700 to
10,100 pounds, a payload capacity of approximately 1,600 to 5,100 pounds and a range of up to 55 to 110 miles depending on vehicle specification and battery configuration. The
Edison is used in a wide range of service and delivery applications, as well as specialty applications such as refrigerated delivery, utility boom and shuttle service. We intend to continue to develop
and introduce a next generation Smith Edison that utilizes our Smith Drive, Smith Power and Smith Link technologies.
We
also are developing and plan to introduce in early 2012 a Newton model that is configured as a step van. We expect this model will have a GVW of approximately 14,000 to
22,000 pounds, a payload capacity of approximately 2,700 to 10,000 pounds and a range of up to 40 to 120 miles depending on battery configuration. We expect the vehicle will be
used primarily for delivery of parcels, uniforms and baked goods. The Newton step van will utilize our Smith Drive, Smith Power and Smith Link technologies.
Our
production operations leverage our supply chain of component manufacturers and allow us to focus on vehicle assembly. This focus contributes to our low capital expenditure
requirements and rapidly scalable capacity, and makes our decentralized production strategy financially advantageous. To continue to drive and sustain the economic advantage of our vehicles over
diesel trucks, we are working to reduce our materials, operating and production costs, which we expect will reduce the prices of our vehicles and improve our gross margin. We have implemented a
three-phased approach to reducing costs, which we refer to as our "cost down" initiative, which we believe will help us achieve these goals. The first phase was focused on transitioning our supply
chain from low volume suppliers to a medium-volume automotive-grade supply chain. The second phase involves the transition from battery and powertrain systems produced by third party suppliers to our
Smith Power and Smith Drive systems and the implementation of multi-source volume purchasing strategies. The third phase will involve the transition of the supply chain for our ancillary components to
higher volume and lower-cost suppliers. We expect to complete all three phases of our current cost down initiative in the first half of 2012. Thereafter, we expect to pursue continuous improvements in
our supply chain and vehicle production costs.
We
have production, research and development, sales and service facilities in Kansas City, Missouri and outside of Newcastle, England. To execute on our decentralized production
strategy, we plan to open sales, service and assembly facilities in targeted urban areas in the United States and abroad, beginning with facilities on the east and west coasts of the United States. We
expect to open the first of these facilities in New York City in the first half of 2012. We also have an established service base in the United Kingdom, where we operate four service facilities and a
fleet of approximately 100 service vehicles. Our U.K. service teams maintain both electric and traditional diesel vehicles.
OUR MARKET OPPORTUNITY
Our primary market is commercial fleet purchasers of medium-duty vehicles, which are on-road vehicles with GVWs
ranging from 14,000 to 33,000 pounds. Medium-duty commercial vehicles are used in, among other things, urban applications such as grocery, package and beverage delivery, utility,
and school and shuttle buses. According to J.D. Power and Associates (Q3, 2011 Medium Duty World Truck Sales), global annual sales of on-highway medium-duty commercial trucks
are expected to reach 822,197 units in 2011, with a compound annual growth rate, or CAGR, of 3.3% from 2011 to 2016. Based on our calculations, this equates to greater than a $40 billion total
available market for these vehicles worldwide. In relation to the overall commercial vehicle market, the medium-duty commercial
3
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vehicle
segment represents a niche opportunity for many traditional large-scale original equipment manufacturers, or OEMs.
Source:
J.D. Power and Associates Global Commercial Vehicles Forecast published September 30, 2011
According
to Fleet Owner Magazine, medium-duty fleet operators have an estimated current installed base of 1.2 million vehicles in the United States. The primary
drivers impacting new purchases by these fleets are macroeconomic growth, industrial activity, fuel and maintenance costs and government spending. Vehicles in this segment are often operated within
urban centers, are driven at speeds below 50 mph and utilize depot-based routes with predictable distances, typically 50 to 100 miles per day. In addition, fleet owners tend to maintain a large
number of vehicles, typically purchase in high volume, and can leverage economies of scale in the operation and servicing of such vehicles. Fleet size varies depending on the company, but large
consumer products and package delivery companies such as Frito-Lay North America, Inc., or Frito-Lay, Coca-Cola and FedEx have fleets in excess of 20,000 vehicles, with an
average service life of eight years. As a result, fleet owners place significant importance on total cost of ownership, which includes a vehicle's upfront cost as well as ongoing operating costs such
as fuel and maintenance. According to J.D. Power and Associates, on average, gasoline and diesel trucks in this category have a fuel economy of approximately 8.4 miles per gallon. We estimate
that diesel trucks in this category cost between $0.15 and $0.23 per mile to maintain.
OUR COMPETITIVE STRENGTHS
We believe that the following strengths position us well to capitalize on the expected growth in demand for medium-duty
electric commercial vehicles:
•
Focus on commercial electric vehicles.
We believe that
adoption of electric vehicles will be fastest in commercial applications where the economic benefits are greatest, and which have predictable routes and centralized charging, thereby avoiding range
anxiety and dependence on development of public infrastructure to support electric vehicle fleets. We believe our position as a leading provider of commercial electric vehicles enables us to benefit
from this trend.
•
First mover with established major commercial fleet relationships in the United States, Europe and
Asia.
We believe we are the only vehicle manufacturer selling to major commercial fleets in the United States and Europe that
exclusively produces electric vehicles. We have sold trucks to and are currently negotiating additional orders with customers such as Staples, Frito-Lay, Coca-Cola, TNT Express and DHL,
some of which are among the largest purchasers of medium-duty trucks
4
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in
the world. We believe that our established relationships with large customers position us to receive additional orders from them, which will increase the recognition of our products with
prospective customers and reinforce our brand equity.
•
Proven ability to reduce the cost of our vehicles.
We
believe that wider adoption of commercial electric vehicles can be achieved by reducing their cost. We have already demonstrated our ability to reduce the cost of our vehicles. We believe our
component sourcing strategy coupled with our engineering expertise will allow us to continue to reduce the cost of our vehicles and increase their attractiveness to customers.
•
Low capital intensity of production.
We believe our
ability to achieve a relatively low level of capital intensity with respect to our production operations will enable us to expand more rapidly and deliver high returns on invested capital. We assemble
our vehicles using components manufactured by pre-qualified third party vendors using our specifications and designs. By purchasing components and focusing on assembly, we are able to
leverage medium-volume automotive-grade suppliers who have already achieved economies of scale, allowing us to avoid significant fixed costs and capital investment.
•
Our vehicle and system design facilitates component-based cost reduction and protection of our trade secrets and
know-how.
We believe our component-based approach allows us to achieve lower costs when compared to buying entire systems,
which typically carry higher margins for suppliers, and more easily and fairly fosters competition among multiple suppliers, as greater sourcing options exist for components as compared to systems.
For example, our recently introduced Smith Power battery management system allows us to purchase battery modules, rather than entire battery systems, and over time we expect to purchase battery cells
and assemble our own battery modules into packs, thereby further reducing our costs. Our powertrain provides us the ability to purchase at either a system or component level, such that we are able to
purchase motors, inverters, controllers and transmissions separately from suppliers. Our approach also allows us to continuously develop our intellectual property and to better protect our trade
secrets and know-how because no one supplier has access to our complete system design.
•
Modular battery system design that allows customers to configure each truck's range based on its application and
significantly impact the total cost of vehicle operation.
We have designed our battery system to be modular so the same vehicle can
accept battery packs with different capacities. For example, the Smith Newton has multiple battery pack options depending on the customer's range requirements and duty cycle. The flexibility to
correctly size each vehicle's battery pack allows customers to select the most cost effective solution for their particular application, with the option to add additional capacity in order to
repurpose vehicles for new applications in the future. Together, we believe these options allow our customers to maximize each vehicle's economic return, thereby increasing the attractiveness of our
vehicles.
•
Focus on medium-duty commercial vehicles positions us well to avoid direct competition with
heavy-duty truck and light-duty automotive OEMs.
Incumbent heavy-duty truck manufacturers and
light-duty automotive OEMs generally are not as focused as we are on sales of medium-duty trucks due to the relatively limited sales volume opportunity. We believe that as an
early entrant with exclusive focus on medium-duty vehicles, we are well positioned to avoid direct competition with the much larger organizations that produce heavy- and
light-duty trucks.
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OUR STRATEGY
We intend to be a leading global producer of medium-duty commercial electric vehicles. Key elements of our strategy
include:
•
Focusing on large, well-recognized commercial operators to establish long-term customer
advocates.
We are focusing our sales efforts on industry-leading companies and governmental entities that operate substantial,
well-recognized, medium-duty commercial vehicle fleets. These entities have not only the resources available to purchase our vehicles, but also the corporate or public
commitment to support and sustain the development of the commercial electric vehicle industry. We believe this strategy will increase our sales and provide us with market credibility. Additionally,
these customers typically have well-defined fleet replacement strategies that strengthen our visibility with respect to customers' purchasing cycles and future supply needs.
•
Leveraging our existing vehicle technologies and platforms to diversify applications and sales
channels.
We are leveraging our current vehicle technologies and platforms to diversify applications in the United States, Europe and
Asia. We anticipate these new vehicle models will broaden our reach within our addressable market and result in increased sales to our existing customers. In addition to offering vehicles with a wider
range of GVWs, we are working with several truck and bus body manufacturers to provide specialized models, including a step van, shuttle and school buses, aircraft ground service and military
transportation. These relationships will not only allow us to offer specialized models to our commercial fleet customers, but also could open new sales channels for us, as these manufacturers also may
purchase our vehicles for resale to the end users.
•
Continuing to focus on technological innovation to reduce the initial cost of our
vehicles.
We are focused on improving our vehicle technologies and broadening our proprietary intellectual property rights over systems
and components incorporated into our vehicles. These strategies are intended to improve our vehicle performance and reliability, strengthen our competitive position and lower our vehicle costs. For
example, our recently introduced Smith Power battery management system allows us to purchase battery modules, and ultimately will allow us to purchase lithium-ion cells, from various
pre-qualified manufacturers. We expect that this ability to source from multiple suppliers will enable us to reduce the cost per kilowatt hour of the batteries used in our vehicles and
improve reliability.
•
Establishing sales, service and assembly facilities in selected local
markets.
We intend to establish sales, service and assembly facilities in select urban areas in different regions of the United States
and abroad. Our initial plans include opening facilities on the east and west coasts of the United States, including a facility in New York City, which we anticipate will open in the first half of
2012. In addition to increasing our production capacity, these new facilities will allow us to provide localized sales and service and will significantly reduce costs associated with shipping
completed trucks from our existing U.S. and U.K. locations to our customers.
•
Supporting and leveraging our customers' brands through branding synergies and
co-promotions.
We intend to continue helping our customers build and achieve corporate sustainability objectives and enhance
their brand images. Our efforts include co-promotional media and joint presentations at industry conferences and other public events that highlight the ongoing replacement of our
customers' legacy diesel fleets with our environmentally-friendly, 100% electric vehicles.
•
Providing customized battery acquisition models to our
customers.
We intend to provide purchasing options for the battery system used in our vehicles that meet our customers' varying
purchasing strategies. For example, we intend to provide our customers with the flexibility to purchase complete vehicles that include battery systems or to purchase base vehicles and separately
6
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acquire
battery systems through leasing arrangements with third parties. In the future we may offer battery leasing arrangements to our customers.
•
Working with federal and state governments to promote the electric vehicle
industry.
We work with government authorities to promote the adoption of electric vehicles and believe we are
well-positioned to benefit from support for commercial electric vehicles. Government support for the development and use of commercial electric vehicles can accelerate their adoption. Such
support ranges from tax incentives, to end-user rebates for the purchase of electric vehicles, to consortium tenders for the purchase of electric vehicles in volume.
RISK FACTORS
Our business is subject to a number of risks and uncertainties that you should carefully consider prior to deciding whether to invest
in our common stock. These risks are discussed more fully in the section entitled "Risk Factors" beginning on page 16. For example,
•
we have had a history of losses, and we may be unable to achieve or sustain profitability;
•
we have yet to achieve positive cash flow and, given our projected funding needs, our ability to generate positive cash
flow is uncertain;
•
we will need access to additional financing, which may not be available to us on acceptable terms or at all, and if we
cannot access additional financing when we need it and on acceptable terms, our business, prospects, financial condition, operating results and ability to continue as a going concern could be
adversely affected;
•
our limited operating history makes evaluating our business and future prospects difficult, and may increase the risk of
your investment;
•
our future growth is dependent upon the willingness of operators of commercial vehicle fleets to adopt electric vehicles
and on our ability to produce, sell and service vehicles that meet their needs;
•
our business, prospects, financial condition and operating results could be adversely affected if we experience
disruptions in our supply chain or if we cannot obtain materials of sufficient quality at reasonable prices;
•
our business, prospects, financial condition and operating results will be adversely affected if we cannot reduce and
adequately control the costs and expenses associated with operating our business, including our costs of materials, production and sales;
•
we recently transitioned the powertrains and battery systems used in our U.S.-produced vehicles to our Smith Drive and
Smith Power systems, and any difficulties we experience with the performance of these systems or our supply chain as a result of this transition could adversely affect our business, prospects,
financial condition and operating results;
•
our inability to effectively and quickly scale our vehicle assembly processes from low volume production to high volume
production could adversely affect our business, prospects, financial condition and operating results;
•
we rely on a limited number of customers for a significant portion of our revenue, and the loss of any of these customers
could materially harm our business; and
•
the unavailability, reduction, elimination or adverse application of government subsidies, incentives and regulations
could have an adverse effect on our business, prospects, financial condition and operating results.
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RECENT DEVELOPMENTS
Senior note financing
On September 14, 2011, we issued a $2.8 million senior unsecured note, or the senior note, to one of our existing
stockholders. The senior note accrued interest at 8.00% per annum and had a maturity date of December 31, 2011. We exchanged the senior note in connection with our 2011 convertible notes
financing discussed below.
2011 convertible notes financing
Between October 7, 2011 and October 31, 2011, we issued and sold in a private placement senior unsecured convertible
promissory notes, or 2011 convertible notes, and seven-year warrants to purchase 726,960 shares of our common stock for aggregate proceeds of $30.0 million, consisting of cash
proceeds of $25.2 million, cancellation of the $2.8 million of indebtedness under the senior note and the conversion of approximately $2.0 million of the outstanding balance of
the purchase price we owe to Tanfield Group Plc, or Tanfield, in connection with the acquisition of our Smith UK business. Each 2011 convertible note had a maturity date that was three years
from its date of issuance and accrued interest at a per annum rate of 8.50%, 12.00% and 15.00% for the first, second and third year of its term, respectively. The 2011 convertible notes converted into
shares of our Series C convertible redeemable preferred stock, par value $0.001 per share, or the Series C preferred stock, upon our receipt of $30.0 million of proceeds from the
2011 convertible notes financing. Each warrant is exercisable at any time for the number of shares of our common stock equal to 30% of the initial principal amount of the related note divided by the
exercise price of $12.38 and is automatically exercised upon the pricing of an initial public offering of our common stock.
Series C preferred stock issuance
Between November 3, 2011 and November 8, 2011, we issued 2,431,170 shares of our Series C preferred stock in
connection with the conversion of all of our outstanding 2011 convertible notes. We did not receive any additional cash proceeds upon the conversion of the 2011 convertible notes into Series C
preferred stock.
Transition to next generation technologies
We recently completed the transition of the powertrain and battery system used in the U.S.-produced Smith Newton to our Smith Drive and
Smith Power technologies. In order to facilitate this transition, we temporarily suspended U.S. production of the Newton in August 2011 and re-tooled our Kansas City production
facility. We began limited production of our second generation Newton, which includes our Smith Drive, Smith Power and Smith Link technologies, in November 2011 and are in the process of
ramping production and integrating new vendors into our supply chain.
COMPANY INFORMATION
Smith Europe and its predecessor entities have existed since the early 1920s. We were incorporated in Delaware in 2009 and have been
operating on a consolidated basis with Smith Europe since January 2011, when we acquired the business of Smith UK from Tanfield. We believe our acquisition of the Smith UK business provides us
with:
•
a platform on which we can expand our business internationally, particularly in Europe and Asia, where fuel costs exceed
those in the United States;
•
enhanced product development capabilities as a result of access to Smith UK's engineering division;
8
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•
access to recurring service-related revenues from Smith UK's fleet management services; and
•
Smith UK's existing vehicle technologies and the elimination of a royalty obligation to Tanfield. Smith Europe now owns
the intellectual property rights we previously licensed from Tanfield.
We
are headquartered in Kansas City, Missouri. Our principal executive offices are located at 12200 N.W. Ambassador Drive, Suite 326, Kansas City, Missouri 64163,
and our telephone number at this location is (816) 464-0508. Our website address is www.smithelectric.com. Information contained on our website is not incorporated by reference into
this prospectus and you should not consider information on our website to be part of this prospectus.
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THE OFFERING
Common stock we are offering
shares
(or                shares, if the underwriters exercise their over-allotment option in full)
Common stock offered by the selling stockholders
shares
(                shares, if the underwriters exercise their option to purchase shares from the selling stockholders in full)
Over-allotment option
shares
Common stock to be outstanding after this offering
shares
Use of proceeds
We intend to use $         million of the net proceeds to us from
this offering to redeem $            in principal amount of our outstanding 10% Series A secured convertible debentures, or Series A debentures. We intend to use the remainder of
the net proceeds to us from this offering for capital expenditures, working capital and other general corporate purposes. See the "Use of Proceeds" section of this prospectus beginning on page 43 for more information.
We will not receive any proceeds from the sale of shares by the selling stockholders.
Risk factors
You should read the "Risk Factors" section of this prospectus beginning on page 16 for a discussion of factors to
consider carefully before deciding whether to purchase shares of our common stock.
Nasdaq Global Market symbol
"SMTH"
The
number of shares of our common stock that will be outstanding after this offering is based on 10,507,929 shares of our common stock outstanding as of November 8, 2011 and
excludes:
•
1,652,688 shares of our common stock issuable upon the exercise of stock options outstanding as of November 8, 2011
at a weighted average exercise price of $10.45 per share;
•
shares of our common stock issuable upon conversion of $            in principal amount of our outstanding
Series A debentures at an assumed conversion price of $            , which is 80% of the mid-point of the price range listed on the cover page of this prospectus; and
•
3,000,000 shares of our common stock reserved as of the closing date of this offering for future issuance under our 2012
Incentive Plan.
Unless
otherwise indicated, the information in this prospectus reflects the following:
•
the automatic conversion of all of the outstanding shares of our Series B convertible redeemable preferred stock,
par value $0.001 per share, or our Series B preferred stock, into shares of our common stock on a one-to-one basis, immediately prior to the closing of this offering;
•
the automatic conversion of all of the outstanding shares of our Series C preferred stock into shares of our common
stock, on a one-to-one basis, immediately prior to the closing of this offering;
10
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•
the automatic exercise, on a net exercise basis, of all of the warrants issued in our 2011 convertible notes financing, or
the 2011 warrants, for an aggregate of 726,960 shares of our common stock upon the pricing of this offering;
•
the            for            stock split of our
outstanding common stock effected on                        ;
•
the filing of our fourth amended and restated certificate of incorporation, or our certificate of incorporation, and the
adoption of our amended and restated by-laws, or our by-laws, as of the closing date of this offering; and
•
no exercise by the underwriters of their over-allotment option.
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SUMMARY HISTORICAL FINANCIAL DATA
The summary combined and consolidated financial data should be read together with our financial statements and the accompanying notes
appearing elsewhere in this prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The summary historical financial data in this section is not
intended to replace our historical financial statements and the accompanying notes. As of and for the periods prior to December 31, 2010, the financial statements of Smith UK and Smith US are
presented on a combined basis. As of and for periods subsequent to January 1, 2011, the financial statements for Smith Europe and Smith US are presented on a consolidated basis. Our historical
results are not necessarily indicative of our future results. We derived the statement of operations data for 2008, 2009 and 2010 and the balance sheet data as of December 31, 2009 and 2010
from our audited financial statements appearing elsewhere in this prospectus. The statement of operations data for the six months ended June 30, 2010 and 2011 and the balance sheet data as of
June 30, 2011 are derived from our unaudited interim financial statements appearing elsewhere in this prospectus. The balance sheet data as of December 31, 2008 is unaudited and has been
derived from accounting records of Tanfield that are not included elsewhere in this prospectus. See "Selected Historical Financial Data" for certain information regarding this data. The unaudited
interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal
recurring adjustments, necessary to state fairly our financial position as of June 30, 2011 and results of operations for the six months ended June 30, 2010 and 2011. Operating results
for
the six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.
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Years ended December 31,
Six Months ended June 30,
2010
2009
2008
2011
2010
(in thousands, except share and per share amounts)
Combined and Consolidated Statement of Operations Data:
Revenue
Vehicle(1)
$
23,827
$
8,223
$
14,166
$
31,930
$
9,633
Service and repairs(2)
11,767
14,631
18,208
5,672
6,191
Total revenue
35,594
22,854
32,374
37,602
15,824
Cost of revenue
Vehicle
33,117
13,370
21,671
40,035
12,335
Service and repairs
12,175
14,421
18,124
5,945
6,165
Total cost of revenue
45,292
27,791
39,795
45,980
18,500
Gross loss
(9,698
)
(4,937
)
(7,421
)
(8,378
)
(2,676
)
Research and development expense
2,550
1,126
9,478
1,457
830
Selling, general and administrative
13,307
10,697
5,411
7,031
4,360
Total operating expenses
15,857
11,823
14,889
8,488
5,190
Operating loss
(25,555
)
(16,760
)
(22,310
)
(16,866
)
(7,866
)
Other expense (income)
Interest expense
3,699
696
—
1,881
1,225
Government grant reimbursements
(688
)
(18
)
—
(205
)
(315
)
Loss on extinguishment of debt
—
—
—
971
—
Other expense, net
1,698
60
—
1,763
745
Net loss
$
(30,264
)
$
(17,498
)
$
(22,310
)
$
(21,276
)
$
(9,521
)
Net loss per share of common stock, basic and diluted(3)(4)
$
(2.95
)
$
(1.89
)
N/A
$
(2.05
)
$
(0.94
)
Shares used in computing net loss per share of common stock, basic and diluted(3)(4)
10,258
9,271
N/A
10,381
10,133
Pro forma net loss per share of common stock, basic and diluted(3)(5)
$
$
$
$
$
Shares used in computing pro forma net loss per share of common stock, basic and diluted(3)(5)
(1)
Vehicle
revenue consists of revenues derived primarily from the sale of our Newton and Edison vehicles. Vehicle revenue also includes payments received by
us in connection with Smith Europe's, and previously Smith UK's, distribution of forklifts.
(2)
Service
and repairs revenue consists of revenues derived from the provision of fleet maintenance and repair services. These services, which are primarily
provided in the United Kingdom, include services for traditional diesel-fueled vehicles as well as for electric vehicles.
(3)
Our
basic net loss per share of common stock is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for
the period. The diluted net loss per share of common stock is computed by dividing the net loss by the weighted-average number of shares of common stock and, if dilutive, potential shares of common
stock outstanding during the period. Potential shares of common stock consist of stock options and warrants to purchase shares of our common stock (using the treasury stock method) and the conversion
of our
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Series B
preferred stock, 12% senior unsecured convertible promissory bridge notes and Series A debentures (using the if-converted method). As we generated a loss in each
period, the potential shares of common stock would have reduced our per share loss (antidilutive) and, therefore, were excluded from the calculation.
(4)
Smith
Electric Vehicles Corp. was not incorporated until January 2009. Smith UK, the predecessor entity, was, in part, a division of Tanfield and, in part,
a wholly-owned subsidiary of Tanfield and did not have separately issued stock. As a result, we are unable to calculate loss per share of common stock for the year ended December 31, 2008. See
Note 1, "Nature of Business and Presentation" to the combined and consolidated financial statements included elsewhere in this prospectus for information regarding our acquisition of Smith UK.
(5)
Pro
forma net loss per share of common stock, basic and diluted includes shares of common stock issuable upon the automatic conversion of all of the
outstanding shares of our Series B preferred stock into shares of our common stock, at a one-to-one conversion ratio, immediately prior to the closing of this offering,
and the            for            stock split of our outstanding common stock effected
on            .
The
following table summarizes our consolidated balance sheet as of June 30, 2011:
•
on an actual basis;
•
on a pro forma basis to reflect the filing of our certificate of incorporation, the conversion of all of our outstanding
shares of Series B preferred stock into 4,809,007 shares of our common stock, based on the one-to-one conversion ratio in effect as of June 30, 2011; and the
            for            stock split of our outstanding common stock effected
on                        ; and
•
on a pro forma, as adjusted basis to reflect the pro forma adjustments described above, our receipt of the estimated net
proceeds to us from this offering, based on an assumed initial public offering price of $            per share (the mid-point of the price range set forth on the cover page of this
prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, and our use of such net proceeds to us as described in "Use of
Proceeds."
As of June 30, 2011
Actual
Pro forma
Pro forma, as
adjusted
(unaudited)
(in thousands, except share
and per share data)
Combined and Consolidated Balance Sheet Data:
Cash and cash equivalents
$
7,227
$
$
Property, plant and equipment, net
4,747
Working (deficit) capital
(2,918
)
Total assets
38,394
Bridge notes, net of discount
—
Bridge note detachable warrants
—
Note payable—Tanfield
$
7,750
Series A debentures, net of discount
$
10,031
$
Series A conversion option
3,052
Series B convertible redeemable preferred stock
56,688
Common stock warrant
23
Total stockholders' (deficit) equity
(73,692
)
Each
$1.00 increase or decrease in the assumed initial public offering price of $            per share (the mid-point of the price range set forth on the cover page of
this prospectus) would increase or
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decrease,
as applicable, our pro forma, as adjusted cash and cash equivalents, additional paid-in capital and stockholders' equity by approximately $             million,
assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and
after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The
pro forma column and the pro forma, as adjusted column in the table above do not include:
•
714,688 shares of our common stock issuable upon the exercise of options outstanding as of June 30, 2011 at a
weighted average exercise price of $7.98 per share;
•
938,000 shares of our common stock issuable upon the exercise of options issued after June 30, 2011 at a weighted
average exercise price of $12.33 per share;
•
shares of our common stock issuable upon conversion of
$            in principal amount of our
outstanding Series A debentures at an assumed conversion price of $            , which is 80% of the mid-point of the price range listed on the cover page of this prospectus;
•
726,960 shares of our common stock issuable upon the exercise, on a net exercise basis, of the 2011 warrants at a weighted
average exercise price of $12.38 per share;
•
the issuance in November 2011 of shares of our Series C preferred stock and the conversion of such shares into
2,431,170 shares of our common stock, based on a one-to-one conversion ratio; and
•
3,000,000 shares of our common stock reserved for future issuance under our 2012 Incentive Plan, which will become
effective in connection with the consummation of this offering.
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RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the following risks
and all other information contained in this prospectus, including our financial statements and the related notes, before investing in our common stock. If any of the following risks materialize, our
business, prospects, financial condition and operating results could be materially harmed. In such case, the price of our common stock could decline, and you may lose some or all of your
investment.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
We have had a history of losses, and we may be unable to achieve or sustain profitability.
We have never been profitable and as of June 30, 2011 have an accumulated deficit of $74.2 million. We have had net
losses in each quarter since our inception. Our net losses for the six months ended June 30, 2011 and the years ended December 31, 2008, 2009 and 2010 were $21.3 million,
$22.3 million, $17.5 million and $30.3 million, respectively. We expect that we will continue to incur net losses during the remainder of 2011. We expect to incur significant
future expenses as we develop and expand our business, particularly when we establish our network of sales, service and assembly facilities in the United States and abroad. Following the completion of
this offering, we also expect to incur significant legal, accounting and other expenses that we did not incur as a private company. Taken together, these and other increased expenditures may make it
difficult for us to achieve and maintain future profitability. We may incur significant losses in the future for a number of reasons, including the other risks described in this prospectus, and we may
encounter unforeseen expenses, difficulties, complications, delays and other unknown events. Accordingly, we may not be able to achieve or maintain profitability.
We have yet to achieve positive cash flow and, given our projected funding needs, our ability to generate positive cash flow is uncertain.
We have had negative cash flow from operating and investing activities of $24.2 million, $26.9 million,
$13.4 million and $13.9 million for the six months ended June 30, 2011 and the years ended December 31, 2008, 2009 and 2010, respectively. We anticipate that we will
continue to have negative cash flow for the foreseeable future as we make significant capital expenditures to open sales, service and assembly facilities and incur increased research and development,
sales and marketing, and general and administrative expenses. Our business also will at times require significant amounts of working capital to support our growth. An inability to generate positive
cash flow for the foreseeable future may adversely affect our ability to raise needed capital for our business on reasonable terms, diminish supplier or customer willingness to enter into transactions
with us, and have other adverse effects that may decrease our long-term viability.
We will need access to additional financing, which may not be available to us on acceptable terms or at all. If we cannot access additional financing when we need it and on
acceptable terms, our business, prospects, financial condition, operating results and ability to continue as a going concern could be adversely affected.
Our growth-oriented business plan to design, produce, sell and service commercial electric vehicles using a decentralized production
model will require continued capital investment. We have received a report from our independent registered public accounting firm on our 2010 financial statements that contains an explanatory
paragraph stating that our recurring losses from operations, negative working capital and stockholders' capital deficiency and the uncertainty around our ability to raise additional capital raise
substantial doubt about our ability to continue as a going concern. We expect that our cash and cash equivalent balances, together with our anticipated cash from operating activities, will be
sufficient to fund our operations, including our planned capital expenditures and research and development activities, through the first quarter of 2012. However, if our operating costs exceed our
expectations or if we incur any significant unplanned expenses, we may need to raise additional funds
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through
the issuance of equity, equity-related or debt securities or by obtaining credit from government or financial institutions. This capital will be necessary to fund our ongoing operations,
continue research, development and design efforts, open our sales, service and assembly facilities, improve infrastructure and introduce new or improve existing vehicle models. We cannot be certain
that additional financing will be available to us on favorable terms when required, or at all, particularly given that we do not now have a committed credit facility with any government or financial
institution. If we cannot obtain additional financing when we need it and on terms acceptable to us, our business, prospects, financial condition, operating results and ability to continue as a going
concern could be adversely affected.
Our limited operating history makes evaluating our business and future prospects difficult, and may increase the risk of your investment.
You must consider the risks and difficulties we face as an early stage company with limited operating history in evaluating an
investment in our common stock. If we do not successfully address these risks and difficulties, including the other risks discussed in this prospectus, our business, prospects, financial condition and
operating results may be adversely affected. Although Smith Europe and its predecessor entities have existed since the early 1920s, Smith was formed in January 2009 and Smith and Smith Europe have
been operating as a consolidated company only since January 2011. Further, we have sold the Smith Newton in the United States only since December 2009 and our current senior management team has been
with us only since May 2011. As such, we have a very limited operating history on which investors can base an evaluation of our business, prospects and operating results, which may increase the risk
of their investment.
Our future growth is dependent upon the willingness of operators of commercial vehicle fleets to adopt electric vehicles and on our ability to produce, sell and service
vehicles that meet their needs. If the market for commercial electric vehicles does not develop as we expect or develops more slowly than we expect, our business, prospects, financial condition and
operating results will be adversely affected.
Our growth is dependent upon the adoption of electric vehicles by operators of commercial vehicle fleets and on our ability to produce,
sell and service vehicles that meet their needs. The entry of commercial electric vehicles into the medium-duty commercial vehicle market is a relatively new development, particularly in
the United States, and is characterized by rapidly changing technologies and evolving government regulation, industry standards and customer views of the merits of using electric vehicles in their
businesses. As such, we believe that operators of commercial vehicle fleets consider a number of factors when deciding whether to purchase our commercial electric vehicles (or commercial electric
vehicles generally) or vehicles powered by internal combustion engines, particularly diesel-fueled vehicles. We believe these factors include:
•
the difference in the initial purchase prices of commercial electric vehicles and vehicles with comparable GVWs powered by
internal combustion engines, both including and excluding the impact of government and other subsidies and incentives designed to promote the purchase of electric vehicles;
•
the total cost of ownership of the vehicle over its expected life, which includes the initial purchase price and ongoing
operating and maintenance costs;
•
the availability of tax and other governmental incentives to purchase and operate electric vehicles and future regulations
requiring increased use of nonpolluting vehicles;
•
government regulations and economic incentives promoting fuel efficiency and alternate forms of energy;
•
fuel prices, including volatility in the cost of diesel;
•
corporate sustainability initiatives;
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•
commercial electric vehicle quality, performance and safety (particularly with respect to lithium-ion battery
packs);
•
the quality and availability of service for the vehicle, including the availability of replacement parts;
•
the limited range over which commercial electric vehicles may be driven on a single battery charge;
•
access to charging stations and standardization of electric vehicle charging systems;
•
electric grid capacity and reliability; and
•
macroeconomic factors.
If,
in weighing these factors, operators of commercial vehicle fleets determine that there is not a compelling business justification for purchasing commercial electric vehicles,
particularly those that we
produce and sell, then the market for commercial electric vehicles may not develop as we expect or may develop more slowly than we expect, which would adversely affect our business, prospects,
financial condition and operating results.
If
our customers are unable to efficiently and effectively integrate our electric vehicles into their existing commercial fleets our sales may suffer and our business, prospects,
financial condition and operating results may be adversely affected.
Our
sales strategy involves a comprehensive plan for the pilot and roll-out of our electric vehicles, as well as the ongoing replacement of existing commercial vehicles with
our electric vehicles, that is tailored to the individual needs of our customers. If we are unable to develop and execute fleet integration strategies or fleet management support services that meet
our customers' unique circumstances with minimal disruption to their businesses, our customers may not realize the economic benefits they expect from our electric vehicles. If this were to occur, our
customers may not order additional vehicles from us, which could adversely affect our business, prospects, financial condition and operating results.
Our business, prospects, financial condition and operating results will be adversely affected if we cannot reduce and adequately control the costs and expenses associated
with operating our business, including our materials and production costs.
We incur significant costs and expenses related to procuring the materials and components required to produce our commercial electric
vehicles and assembling vehicles. As a result, without including the impact of government or other subsidies and incentives, the purchase prices for our commercial electric vehicles currently are
substantially higher than the purchase prices for diesel-fueled vehicles with comparable GVWs. Through our cost down initiative, we are attempting to reduce our materials and production costs to the
point where the upfront cost of our vehicles, excluding the battery system and the impact of government subsidies and incentives, is competitive with or a slight premium to the upfront cost of diesel
trucks with comparable GVWs. We have had some success reducing our cost of revenue, however, the cost of producing our vehicles currently exceeds the sales prices of our vehicles. If we are unable to
reduce costs effectively, we will not be able to sustain our current pricing and therefore may lose sales to lower priced competitors and we may not be able to achieve profitability.
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Because we assemble vehicles from components supplied by third parties, we are particularly dependent on those third parties to deliver raw materials, parts, components and
services in adequate quality and quantity in a timely manner and at reasonable prices. Our business, prospects, financial condition and operating results could be adversely affected if we experience
disruptions in our supply chain or if we cannot obtain materials of sufficient quality at reasonable prices.
Our production operations depend on obtaining raw materials, parts and components, manufacturing equipment and other supplies, and
services from reliable suppliers in adequate quality and quantity in a timely manner. For example, we purchase the chassis and cab for the Smith Newton from Avia Ashok Leyland Motors S.R.O., or Avia,
located in the Czech Republic; the battery system for our vehicles from A123 Systems, Inc., or A123, and Valence Technology, Inc., or Valence; the charger for the Smith Newton from EDN
Group S.r.l., or EDN, located in Italy; the charger for the Smith Edison from BRUSA Electronik AG, located in Switzerland; and the powertrain for our vehicles from Magnetic Systems Technology
Limited, or MagTec, located in the United Kingdom, and Enova Systems, Inc., or Enova. In cases where we rely on one supplier for a component or system, it may be difficult for us to substitute one
supplier for another, increase the number of suppliers or change one component for another in a timely manner or at all due to interruption of supply, dependence on a sole source supplier or increased
industry demand. We may not be able to shift our supply chain to alternative suppliers if any of our significant suppliers experience financial distress, as has been common in the motor vehicle
industry over the past several years. Furthermore, many of our current suppliers are small companies that produce a limited number of specialized products, which may make them attractive acquisition
targets. If any of these suppliers were acquired by a competitor of ours or any other third party that determines to discontinue our supply relationship, we would need to find an alternative supplier,
which we may not be able to do. If we are unable to maintain a consistent, high quality and cost effective supply chain, our business, prospects, financial condition and operating results could be
adversely affected.
We
currently depend on sole source suppliers or a limited number of suppliers for our primary vehicle systems and certain key raw materials and component parts used in producing and
developing our vehicles. For example, we purchase approximately 96%, based on value, of the over 530 parts used in the assembly of the U.S.-produced Smith Newton from sole source suppliers. We
generally purchase materials pursuant to purchase orders placed from time to time and have only a limited number of long-term contracts and other guaranteed supply arrangements with our
sole or limited source suppliers. As a result, many of our suppliers may not be able to meet our requirements relative to specifications and volumes for certain key raw materials and components, and
we may not be able to locate alternative sources of supply at an acceptable cost. Additionally, if a sole source supplier ceases to continue to produce a component with little or no notice to us or
significantly increases the cost of the component, whether due to increased market demand, limited supply or other reasons, our business could be harmed.
We recently transitioned the powertrains and battery systems used in our U.S.-produced vehicles to our Smith Drive and Smith Power systems, and any difficulties we
experience with our supply chain as a result of this transition could adversely affect our business, prospects, financial condition and operating results.
We believe that the transition to our Smith Drive and Smith Power systems is critical to reducing the cost of our commercial electric
vehicles to a level that, even without the benefit of government subsidies and incentives, is competitive with or a slight premium to the cost of diesel-fueled vehicles with comparable GVWs and to our
ability to profitably grow our business. In connection with this transition, we moved to a new supply chain, including suppliers with which we have limited or no prior experience. We cannot be certain
that these third parties will be willing or able to supply materials and components at prices, in quantities and on other terms acceptable to us and, if they are not, that we will be able to otherwise
fulfill our supply needs on acceptable terms.
If
any of our new suppliers are unable to scale to meet our production, cost and quality requirements, our business, prospects, financial condition and operating results could be
adversely affected.
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If we are unable to scale our vehicle assembly processes effectively and quickly from low volume production to high volume production, our business, prospects, financial
condition and operating results could be adversely affected.
Our existing production model is well suited for the low volume production of our vehicles, but may not be well suited for the high
volume production we will require if demand significantly increases for our commercial electric vehicles. Our ability to scale our vehicle assembly process is in part dependent on our ability to
execute on our decentralized production strategy. For more information about the risks associated with our decentralized production strategy, see "—Our decentralized assembly, sales and
service model will present numerous challenges, including site selection for and build-out of new facilities, consistent quality control across facilities and hiring sufficiently skilled
employees. If we are unable to execute on our plan to establish sales, service and assembly facilities in the urban areas we have targeted or if our facilities in any of those markets underperform
relative to our expectations, our business, prospects, financial condition and operating results may be adversely affected" below. If we are unable to scale our existing assembly processes and systems
quickly while maintaining our current quality level, we may be unable to meet our customers' vehicle quality and quantity requirements or our forecasted production schedule or lower our cost of
revenue. As a result, we may not be able to meet our customers' delivery schedules and could face the loss of customers, or be exposed to liability to
customers to which we promised delivery, which could adversely affect our business, prospects, financial condition and operating results.
We rely on a limited number of customers for a significant portion of our revenue and our future growth, and the loss of any of these customers could materially harm our
business.
A significant portion of our total revenue and vehicle revenue is generated from a limited number of vehicle customers. For the year
ended December 31, 2010 and for the six months ended June 30, 2011, four and two of our customers, respectively, collectively accounted for approximately 40% and 62%, respectively, of
our total revenue; and 60% and 73%, respectively, of our vehicle revenue. Frito-Lay accounted for 66% of our vehicle revenue for the six months ended June 30, 2011.
Staples, Inc., Frito-Lay and Sainsbury's accounted for 24%, 14% and 12%, respectively, of our vehicle revenue for the year ended December 30, 2010.
Furthermore,
our growth strategy is premised on expanding our relationships with our largest customers, which increases our dependence on their continued business. Although we expect to
broaden our customer base over time by leveraging our existing relationships and through our acquisition of Smith UK, we expect that most of our revenue will continue, for the foreseeable future, to
come from a relatively small number of customers.
Our
contracts with our customers currently do not include long-term commitments or minimum volumes that ensure future sales of our vehicles. Rather, our customers place
orders for a specified number of vehicles on a purchase order basis, which may be cancelled without financial penalty to the customer. Consequently, our financial results may fluctuate significantly
from period-to-period based on the actions of one or more significant customers. A customer may take actions that affect us for reasons that we cannot anticipate or control,
such as reasons related to the customer's financial condition, changes in the customer's business strategy or operations or as the result of the perceived performance or cost-effectiveness
of our vehicles. The loss of or a reduction in sales or anticipated sales to our most significant customers could have an adverse effect on our business, prospects, financial condition and operating
results.
The unavailability, reduction, elimination or adverse application of government subsidies, incentives and regulations could have an adverse effect on our business,
prospects, financial condition and operating results.
We believe that, currently, the availability of government subsidies and incentives is an important factor considered by our customers
when purchasing our vehicles, and that our growth depends in part
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on
the availability and amounts of these subsidies and incentives. Any reduction, elimination or discriminatory application of government subsidies and incentives because of budgetary challenges,
policy changes, the reduced need for such subsidies and incentives due to the perceived success of electric vehicles or other reasons may result in the diminished price competitiveness of the
alternative fuel vehicle industry generally and our commercial electric vehicles in particular, especially prior to the completion of our current cost down initiative. For example, in the United
States, we and our customers benefit from significant subsidies in connection with the purchase of our vehicles under the California Hybrid Truck and Bus Voucher Incentive Program, or HVIP, Smith
Electric Vehicles Medium-Duty Electric Vehicle Demonstration Project, or the EV Demonstration Project, and state-level Clean Cities programs. Under these programs, purchasers of our
vehicles are eligible to receive subsidies or incentives of up to $20,000, $71,000 and $94,000, respectively, per vehicle purchased from us. See "Business—Government Programs and
Incentives" for more information about the government subsidy and incentive programs in which we or our customers may participate.
Certain
regulations and programs that encourage sales of electric vehicles could be eliminated or applied in a way that adversely impacts sales of our commercial electric vehicles,
either currently or at any time in the future. For example, the U.S. federal government and many state governments, as well as many national governments within the European Union, are facing severe
fiscal crises, which could result in the elimination of programs, subsidies and incentives that encourage the purchase of electric vehicles. In addition, grants made by the DOE under the American
Recovery and Reinvestment Act of 2009 to clean technology companies, such as the EV Demonstration Project grant, may be subject to a high level of scrutiny as a result of recent financial difficulties
experienced by recipients of DOE loan guarantees. If government subsidies and incentives to produce and purchase electric vehicles were no longer available to us or to our customers, or the amounts of
such subsidies and incentives were reduced, our business, prospects, financial condition and operating results could be adversely affected.
We may not be able to obtain, agree on acceptable terms and conditions for, or continue to qualify for all or a significant portion of the government grants, loans and other
incentives for which we have applied and may in the future apply. Our inability to do so could adversely affect our ability to grow our business.
We have applied for, and we assist our customers in applying for, federal and state grants, loans and tax incentives under government
programs designed to stimulate the economy and support the production of electric vehicles and advanced battery technologies. We anticipate that in the future there may be new opportunities for us to
apply for grants, loans and other incentives from federal, state and foreign governments on our own behalf and on behalf of our customers. Our and our customers' ability to obtain funds or incentives
from government sources is subject to the availability of funds under applicable government programs and approval of our and our customers' applications to participate in such programs. The
application process for these funds and other incentives is and will continue to be highly competitive. We are eligible to receive, subject to certain conditions, some or all of which we may not be
able to satisfy, up to $32.0 million of funding under the EV Demonstration Project (up to $4.0 million of which is available to us and $28.0 million of which is available to
compensate our customers for their participation in the project) and, as of September 30, 2011, we and our customers have received approximately $14.7 million of incentives under the
project. However, we cannot assure you that we will be successful in obtaining additional grants, loans or other incentives. Moreover, our ability to obtain funds under state programs will depend on
the continued availability of state funding for such programs.
With
respect to the funding that we have been awarded and the grants, loans and other incentives that we may be awarded, we may not be able to satisfy or continue to satisfy the
requirements and milestones imposed by the granting authority as conditions to receipt of the funds or other incentives on a timely basis or at all.
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For
example, we are subject to annual audits in connection with the EV Demonstration Project and have been and may in the future be subject to additional audits by the Defense Contract
Audit Agency, or DCAA, which is performing such audits for the DOE. A DCAA audit of us, completed in October 2010, revealed significant deficiencies that are considered to be material weaknesses in
our accounting system for accumulating and billing costs under government contracts or financial assistance agreements, including our process for submitting reimbursement claims, our timing for
submitting rebates to our customers and our calculation of indirect costs to be reimbursed by the DOE. The DCAA audit report recommended that reimbursement of expenditures for fixed assets, direct
labor and overhead costs be discontinued under the project until we remedy these issues. In January 2011, we responded to the DOE regarding the DCAA audit findings. Based on this response, the DOE
confirmed in July 2011 that it would resume reimbursements for qualified fixed asset expenditures and direct labor costs incurred by us in connection with the EV Demonstration Project. We have
submitted additional requested information to the DOE and are awaiting a decision on whether the DOE will
resume reimbursement of qualified indirect costs and overhead costs. If the DCAA concludes that our remedial steps taken in response to the current DCAA audit are insufficient or a future DCAA audit
concludes that we continue to have material weaknesses in our accounting system for accumulating and billing costs under government contracts or financial assistance agreements, the DOE could
terminate the EV Demonstration Project and we and our customers would lose access to the remaining $17.3 million of funding available under the project as of September 30, 2011.
In
addition, the EV Demonstration Project and other federal government programs which in the future may make awards to us require us to spend a portion of our own funds for every
incentive dollar we receive or are permitted to borrow and limit the time period in which we must use the funds awarded to us. The EV Demonstration Project, for example, requires us to fund up to
$36.0 million, or 53.0%, of the total cost of our project prior to November 30, 2014, the termination date of the project. We also are required to deliver 510 vehicles by
September 30, 2013 under this program. If we are unable to fund our share of these projects or deliver the required number of vehicles, we will not receive all of the amounts that are available
to us from the government, which could adversely affect our revenues, our customer relationships and our ability to improve our vehicle technologies or expand our production, sales and service
capacity.
We have only a limited number of long-term supply contracts with guaranteed pricing, which exposes us to fluctuations in component, materials and equipment
prices. Substantial increases in these prices would increase our operating costs and could adversely affect our business, prospects, financial condition and operating results.
Because we have only a limited number of long-term supply contracts with guaranteed pricing, we are subject to fluctuations
in the prices of the raw materials, parts and components and equipment we use in the production of our vehicles. In addition, currency fluctuations and a weakening of the U.S. dollar or the British
pound against foreign currencies may adversely affect our purchasing power for such raw materials, parts and components and manufacturing equipment from foreign suppliers. Substantial increases in the
prices for such raw materials, components and equipment would increase our operating costs, and could reduce our margins if we cannot recoup the increased costs through increased vehicle prices. There
can be no assurance that we will be able to recoup these increased costs by increasing the prices of our commercial electric vehicles, which already have a higher purchase price than diesel trucks
with comparable GVWs. Any attempts to increase the announced or expected prices of our commercial electric vehicles in response to increased costs could be viewed negatively by our customers and could
adversely affect our business, prospects, financial condition and operating results.
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Our service model may be costly for us to operate and may not address the service requirements of our existing or prospective customers.
All-electric commercial vehicles incorporate new and evolving technologies and require specialized service. We currently
service the commercial electric vehicles we have sold in the United States by sending technicians from our Kansas City, Missouri facility to the customer's location. We have more extensive service
capabilities in the United Kingdom, where we have four service facilities and a fleet of service vehicles to maintain our customers' vehicles. Once we have established a sales, service and assembly
facility in a geographic area, we intend for that facility to be responsible for servicing the Smith vehicles operating in that area. We do not, however, expect to open these facilities in all of the
geographic areas in which our existing and potential customers may operate our vehicles. In order to address the service needs of customers that are not in close geographic proximity to our sales,
service and assembly facilities or an existing service depot, we plan to deploy technicians from our closest facility to service the vehicles at the customer's location. These special service
arrangements are now and in the future may continue to be costly for us and we may not be able to recoup the costs of providing these services to our customers. In addition, a number of potential
customers may choose not to purchase our commercial electric vehicles because of the lack of a more widespread service network. If we do not adequately address our customers' service needs, our brand
and reputation may be adversely affected, which, in turn, could have an adverse effect on our business, prospects, financial condition and operating results.
Our decentralized assembly, sales and service model will present numerous challenges, including site selection for and build-out of new facilities, consistent
quality control across facilities and hiring sufficiently skilled employees. If we are unable to execute on our plan to establish sales, service and assembly facilities in the urban areas we have
targeted or if our facilities in any of those markets underperform relative to our expectations, our business, prospects, financial condition and operating results may be adversely affected.
Our strategy of establishing sales, service and assembly facilities in selected urban areas in the United States and abroad is
substantially different from the prevailing centralized manufacturing and franchised distribution and service model used in the motor vehicle industry and presents significant risks. Opening a sales,
service and assembly facility in any market will require, among other things, establishing a local order volume that is sufficient to support the facility, finding a suitable and available location,
negotiating a satisfactory lease agreement for the facility, obtaining permits and approvals from local and state authorities (and in the case of facilities to be opened in foreign countries, may
require obtaining approvals from national governments), building out the facility to our specifications and hiring and training employees to assemble, sell and service our vehicles. We plan to seek
state and local government incentives to open sales, service and assembly facilities in the markets we have selected, but we may not be successful in this effort, or the incentives may not be as
significant as we would like. As with any development project, the development and build-out of a facility will subject us to the risk of cost-overruns and delays, which may be
significant. Further, given the novelty and relative scarcity of our commercial electric vehicles compared to other types of commercial vehicles, we may have difficulties locating sufficient numbers
of experienced, skilled assembly and service technicians in any market we select. Once our sales, service and assembly facilities are open for business, we will need to ensure that they maintain a
high level of quality in order to enhance the Smith brand. Even if we are able to address all of the challenges discussed above, and there are no assurances we will be able to, our sales, service and
assembly facilities in one or more markets may not be profitable and we may lose our entire investment in such facilities. If we are unable to establish the local order volume we require in order to
open new sales, service and assembly facilities or are unable to successfully open and profitably operate these new facilities in our target markets, our business, prospects, financial condition and
operating results may be adversely affected.
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If our vehicles fail to perform as expected, our business, prospects, financial condition and operating results could be adversely affected.
Our vehicles may not perform in a manner that is consistent with our customers' expectations for a variety of reasons. Many of our
first generation vehicles have experienced maintenance problems, which has resulted in increased service costs and management time spent to address the customer relationship. We believe we have
responded promptly to and have appropriately addressed our customers' maintenance concerns; however, in some cases our relationship with our customers has been impaired as a result of these issues.
Further, in the past we have experienced
performance issues with the powertrain system previously used in the Smith Newton, which resulted in production delays. As a result, we temporarily suspended U.S. production while we performed
extensive testing on the new powertrain components we use in our second generation Newton.
Vehicles
that we produce and sell in the future also may contain defects in design and manufacture that cause them not to perform as expected or that may require repair. Further, the
performance of our vehicles may be negatively impacted by other factors, such as limitations inherent in existing battery technology and extreme weather conditions. We have performed extensive
internal testing on our current vehicle offerings and on our Smith Drive and Smith Power technologies, however, our vehicles and vehicle technologies, particularly our Smith Drive and Smith Power
technologies, have limited field experience. As such, there can be no assurance that we have detected, and in the future will be able to detect and fix, all defects in our vehicles prior to their
delivery to customers. Furthermore, there can be no assurance that our vehicle technologies will function properly over the entire useful lives of our vehicles. If defects in our vehicles exist or our
vehicle technologies do not perform over time in the manner we expect, we could be required to incur significant costs to fix such defects, replace vehicle systems and/or conduct recalls of our
vehicles, which could adversely affect our brand, business, prospects, financial condition and operating results.
Any
product defect or other failure of our commercial electric vehicles to perform as expected could result in customer losses, adverse publicity, lost revenue, delivery delays, product
recalls, product liability claims, harm to our brand and reputation, and significant warranty and other expenses, any of which could have an adverse effect on our business, prospects, financial
condition and operating results.
Our warranty reserves may be insufficient to cover future warranty claims and we may incur significant non-warranty maintenance and repair costs, each of which
could adversely affect our financial performance.
We have expended significant time and resources performing warranty maintenance on the vehicles we have sold in the United States and
United Kingdom and, as of June 30, 2011, have a warranty reserve of $7.9 million, or approximately 21.0% of our total revenue for the six months ended June 30, 2011, to cover our
expected warranty obligations in future periods. We record and adjust warranty reserves based on changes in estimated costs and actual warranty costs. In the United States, a significant portion of
our warranty maintenance has involved the battery packs and inverters that were used in the Smith Newton until our transition to our Smith Drive and Smith Power technologies. In the United Kingdom, a
significant portion of our warranty maintenance has involved the battery packs, driveline components and chargers used in the Smith Edison. We could in the future become subject to additional
significant and unexpected warranty expense, and there can be no assurances that our existing warranty reserves will be sufficient to cover all claims. If our warranty reserves are inadequate to cover
future warranty claims on our vehicles, our business, prospects, financial condition and operating results could be adversely affected.
We
also may incur significant maintenance and repair costs for non-warranty work we perform on our customers' vehicles. We believe that our growth depends in part on our
customers
becoming advocates for our business and vehicles and, as such, we may choose to perform non-warranty service on their vehicles without charge in order to ensure their satisfaction. Any
costs and expenses related to such maintenance would increase our service and repairs cost of revenue and, if such amounts become significant, could adversely affect our financial condition and
operating results.
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If we are unable to keep up with advances in electric vehicle technology, we may suffer a decline in our competitive position.
There are companies in the electric vehicle industry that have developed or are developing vehicles and technologies that compete or
will compete with our vehicles. We cannot assure you that our competitors will not be able to duplicate our technology or provide products and services similar to ours more efficiently. If for any
reason we are unable to keep pace with changes in commercial electric vehicle technology, particularly battery technology, our competitive position may be adversely affected. We plan to upgrade or
adapt our vehicles and introduce new models in order to continue to provide commercial electric vehicles that incorporate the latest technology, as we are doing with our Smith Drive and Smith Power
technologies. However, there are no assurances that our research and development efforts will keep pace with those of our competitors. If we cannot keep pace with our competitors, our commercial
electric vehicles may not compete effectively with other available electric vehicles which could have an adverse effect on our position in our industry and on our business and operating results.
Our commercial electric vehicles compete for market share with trucks powered by other vehicle technologies that may prove to be more attractive than ours.
Our target market currently is serviced by truck manufacturers with existing customers and suppliers using proven and widely accepted
diesel fuel technologies. Additionally, our competitors are working on developing technologies such as cleaner diesel engines, bio-diesel, fuel cells, natural gas and hybrid
battery/internal combustion engines that may be introduced in our target market. If any of these alternative technology vehicles can provide lower fuel costs, greater efficiencies, greater reliability
or otherwise benefit from other factors resulting in an overall lower total cost of ownership, this may negatively affect the commercial success of our vehicles or make our vehicles uncompetitive or
obsolete.
Many of our competitors have greater financial and other resources, longer operating histories and greater name recognition than we do and one or more of these competitors
could use their greater resources and/or name recognition to gain market share at our expense.
Many of our existing and potential competitors, including Ford Motor Company, or Ford, Navistar International Corporation, or Navistar,
Freightliner Custom Chassis, or Freightliner, PACCAR Inc., or PACCAR, Hino Trucks USA, or Hino, Mitsubishi Fuso, or Fuso, and the Volvo Truck Corporation, or Volvo, have substantially greater
financial resources, more extensive engineering, manufacturing, marketing and customer service and support capabilities, longer operating histories and greater name recognition than we do. As a
result, our competitors may be able to compete more aggressively and sustain that competition over a longer period of time than we can. Each of these competitors has the potential to capture market
share in our target market, which could have an adverse effect on our position in our industry and on our business and operating results.
If we are unable to design, produce, market and sell new electric vehicles that address additional market opportunities, our business, prospects, financial condition and
operating results could be adversely affected.
We may not be able to successfully develop new commercial electric vehicles, address new market segments or the needs of customers in
our existing market, or develop a broader customer base. To date, we have focused our business on the sale of commercial electric vehicles that primarily address the needs of medium-duty,
depot-based commercial fleet operators. In the United States, we have addressed this market by offering the Smith Newton, a 16,500 to 26,400 pound truck (by GVW), while in the United Kingdom and other
countries where we have distribution partners, we have addressed this market by offering both the Smith Newton and the smaller Smith Edison, a 7,700 to 10,100 pound truck (by GVW) that is offered as a
chassis cab, van and minibus. In order to expand our U.S. customer base, we plan to introduce a Newton vehicle that is configured as a step van and to further
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expand
our Newton platform to accommodate additional applications, such as delivery and transit. However, we may be unable to increase the number of applications for which our Newton platform may be
used, which could adversely affect our business, prospects, financial condition and operating results.
We depend on the business of customers that are larger than we are and who may have significant leverage over us in negotiations related to the purchase price of our
commercial electric vehicles. If we are forced to sell our vehicles at lower prices than we anticipate, our business, prospects, financial condition and operating results will be adversely affected.
Our strategy has been, and will continue to be, to pursue business relationships with industry-leading companies that operate
substantial, depot-based, medium-duty commercial vehicle fleets. All of these customers are larger than we are, and wield a significant amount of purchasing power. These customers may in
the future require us to reduce the purchase prices of our commercial electric vehicles to levels that are lower than we anticipate, which may reduce our gross margins or result in negative gross
margins. To compensate for these lower gross margins, we would need to reduce our expenses, which we may be unable to do. If we are forced to sell our vehicles at lower prices than we anticipate and
are unable to compensate for these lower prices by reducing our expenses, our business, prospects, financial condition and operating results will be adversely affected.
If we are unable to convince the marketplace that we have sufficient access to liquidity and positive long-term business prospects we may not be able to expand
our business and our prospects, financial condition and operating results may be adversely affected.
Our prospects, financial condition and operating results may be adversely affected if we are unable to establish and maintain
confidence about our liquidity and business prospects among customers and within our industry. Our vehicles are highly technical products that require maintenance and support. If we were to cease or
cut back operations, even years from now, buyers of our vehicles from years earlier might have much more difficulty in maintaining their vehicles and obtaining satisfactory support. As a result,
customers may be less likely to purchase our vehicles now if they are not convinced that our business will succeed or that our operations will continue for many years. Similarly, suppliers and other
third parties will be less likely to invest time and resources in developing business relationships with us if they are not convinced that our business will succeed.
Accordingly,
in order to build and maintain our business, we need access to liquidity and we must maintain confidence among customers, suppliers and other parties in our liquidity and
long-term business prospects. We believe that maintaining such confidence may be particularly complicated by factors such as the following:
•
our limited operating history;
•
our limited revenues and lack of profitability to date;
•
uncertainty about the long-term marketplace acceptance of commercial electric vehicles;
•
the prospect that we will need access to additional capital to fund our planned operations;
•
the breadth of our expansion plans relative to our existing capital base and scope and history of operations; and
•
the prospect or actual emergence of direct, sustained competitive pressure from larger, more well-capitalized
commercial vehicle makers.
Many
of these factors are largely outside our control, and any negative perceptions about our liquidity or long-term business prospects, even if exaggerated or unfounded, may
harm our business and make it more difficult to raise additional funds when needed.
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We have identified material weaknesses in our internal control over financial reporting. If we fail to remediate these weaknesses and maintain proper and effective internal
controls, our ability to produce accurate and timely financial statements could be impaired, which could negatively impact our operating results, our ability to operate our business and investors'
views of us.
Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate
financial statements on a timely basis is a costly and time-consuming effort that needs, and is required under Securities and Exchange Commission, or SEC, rules, to be evaluated
frequently. In connection with the audit of our financial statements for 2008, 2009 and 2010, we identified material weaknesses in our internal control over financial reporting. A material weakness is
defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual
or interim financial statements will not be prevented or detected on a timely basis by the company's internal controls. The material weaknesses for the year ended and as of December 31, 2010
were as follows:
•
We did not have an adequate number of personnel in our accounting and finance department with sufficient technical
accounting expertise and, as a result, we could not evaluate in a timely manner the accounting implications of our business transactions. For example, our inventory costing system was inadequate to
produce a measure of cost of revenue on a U.S. generally accepted accounting principles, or GAAP, basis and we did not properly manage the accrual process related to cutoffs at the end of reporting
periods.
•
We did not design or maintain effective internal controls over the financial statement close and reporting process in
order to ensure the accurate and timely preparation of financial statements in accordance with GAAP. For example, we did not compare our actual results to our budget, we allowed individuals to process
journal entries without supervisor approval or review, and we had not established information technology control policies.
•
We did not maintain adequate segregation of duties within the accounting and finance department. As result, we had an
increased fraud risk. Compensating controls such as budget to actual reviews and a robust reconciliation processes had not been adequately implemented to provide for the timely identification of
fraudulent activity.
We
are in the process of taking the necessary steps to remediate the material weaknesses that we identified and have made enhancements to our control procedures; however, the material
weaknesses will not be remediated until the necessary controls have been implemented and are operating effectively. We do not know the specific time frame needed to fully remediate the material
weaknesses identified.
We
cannot assure you that our efforts to fully remediate these internal control weaknesses will be successful or that similar or different material weaknesses will not develop.
Implementing
any appropriate changes to our internal controls may distract our management and employees, entail substantial costs to implement new, and modify existing, processes and
take significant time to complete. Moreover, these changes do not guarantee that we will be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy,
or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and harm our business. In addition, investors' perceptions that our internal
controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm our stock price and make it more difficult for us to effectively market and sell our
vehicles to new and existing customers. For a more detailed discussion of our material weaknesses, see "Management's Discussion and Analysis of Financial Condition and Results of
Operations—Internal Control Over Financial Reporting."
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If we are unable to implement new enterprise-wide accounting, information technology and other systems, our growth, profitability and operating results may be
adversely affected.
Following our acquisition of Smith UK on January 1, 2011, we began the process of upgrading and implementing accounting,
information technology and other systems enterprise-wide, which we expect will be completed by the end of 2011. Our new systems may not operate as we expect them to, and we may be required
to expend significant resources to correct problems or find alternative sources for performing these functions. For example, shortly after we began our upgrade process, our new information technology
system experienced successive failures, which delayed our close process for our quarter ended June 30, 2011. Among the risks associated with developing, improving and expanding our core systems
is supply chain disruption, which may affect our ability to obtain supplies when needed or to deliver vehicles to our customers. There are no assurances that our expanded systems will be fully or
effectively implemented on a timely basis, if at all, or that we will not experience additional system failures in the future. If we do not successfully implement our new enterprise-wide
systems, our operations may be disrupted and our operating results could be harmed.
The inability of certain of our customers to obtain credit on commercially reasonable terms may adversely affect our growth prospects.
While most of our current customers are large, well-established companies with significant purchasing power, many of our
potential smaller and medium-sized customers may need to rely on credit or leasing arrangements to gain access to our vehicles. Unlike certain of our competitors who provide credit or leasing services
for the purchase of their diesel-powered vehicles, we do not provide such financial services, which could adversely affect our revenues and market share in the commercial vehicle market. Furthermore,
if leasing solutions for battery packs are not available to our customers on favorable terms when required, these customers may not be able to reduce the capital cost of purchasing our vehicles as we
expect and our business, prospects and financial condition could be adversely affected.
If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or adequately address competitive challenges.
We may experience periods of significant growth as demand for commercial electric vehicles accelerates. Our growth may place a
significant strain on our managerial, administrative, operational, financial, information technology and other resources. Expanding a global organization and managing a geographically dispersed
workforce will require substantial management effort and significant additional investment in our infrastructure. We will be required to continue to improve our operational, financial and management
controls and our reporting procedures, and we may not be able to do so effectively. If we are unable to manage our growth effectively, our ability to
execute our business plan, maintain high levels of service and address competitive challenges will be adversely affected, which, in turn, will adversely affect our business, prospects, financial
condition and operating results.
Our ability to compete could be harmed if we are unable to attract and retain key employees.
There is increasing competition for talented individuals with specialized knowledge of electric vehicles and this competition affects
our ability to hire and retain key employees. The loss of the services of any of our key employees could disrupt our operations, delay the development and introduction of our commercial electric
vehicles and services, and negatively impact our business, prospects and operating results. In particular, we are highly dependent on the services of our President and Chief Executive Officer and our
Chief Technology Officer and Senior Vice President. Both of these executives are subject to employment agreements, but these agreements do not provide for any specific employment term. Our future
growth and success depend upon our ability to attract and retain our executive officers and other key technology, production, sales, service and support personnel. Any
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failure
to do so could adversely impact our business, prospects, financial condition and operating results.
Members of our management team and board of directors are new to the company, to the electric vehicle industry and to leading a U.S. publicly-traded company, and the
execution of our business plan and development strategy could be seriously harmed if the integration of our management team or board is not successful or our management team or board does not adapt to
the demands of managing a public company.
Our business and prospects could be seriously harmed if the integration of our management team or board of directors is not successful.
We expect that it will take time for our management team and for our board of directors to coalesce and function with optimal efficiency, and it is too early to predict whether this integration will
be successful. Since late 2010, we have experienced significant changes in our senior management team and our current senior management team has only limited experience working together as a group.
Specifically, three of the seven members of our senior management team have joined us since November 2010 and none of these new executives have any experience in the electric vehicle industry. Our
Chief Financial Officer and our Vice President of Human Resources and Administration are the only two members of our senior management team that have served in senior roles at U.S. publicly-traded
companies. Furthermore, two of our six directors joined the board in November 2011. This lack of public company experience and of long-term experience working together on both the senior
management and board levels and limited experience in the electric vehicle industry may adversely impact our management team's
ability to quickly and efficiently respond to problems and effectively manage our business and our board's ability to provide effective guidance to and oversight of management.
The demand for commercial electric vehicles depends, in part, on the continuation of current trends resulting from dependence on fossil fuels. Extended periods of low diesel
or other petroleum-based fuel prices could adversely affect demand for our vehicles, which would adversely affect our business, prospects, financial condition and operating results.
We believe that much of the present and projected demand for commercial electric vehicles results from concerns about volatility in the
cost of petroleum-based fuel, the dependency of the United States on oil from unstable or hostile countries, government regulations and economic incentives promoting fuel efficiency and alternative
forms of energy, as well as the belief that climate change results in part from the burning of fossil fuels. If the cost of petroleum-based fuel decreased significantly, the outlook for the
long-term supply of oil to the United States improved, the government eliminated or modified its regulations or economic incentives related to fuel efficiency and alternative forms of
energy, or if there is a change in the perception that the burning of fossil fuels negatively impacts the environment, the demand for commercial electric vehicles could be reduced, and our business
and revenue may be harmed.
Diesel
and other petroleum-based fuel prices have been extremely volatile, and we believe this continuing volatility will persist. Lower diesel or other petroleum-based fuel prices over
extended periods of time may lower the perception in government and the private sector that cheaper, more readily available energy alternatives should be developed and produced. If diesel or other
petroleum-based fuel prices remain at deflated levels for extended periods of time, the demand for commercial electric vehicles may decrease, which would have an adverse effect on our business,
prospects, financial condition and operating results.
We face risks associated with our international operations, including unfavorable regulatory, political, tax and labor conditions, which could harm our business.
We face risks associated with our existing international operations, including possible unfavorable regulatory, political, tax and
labor conditions, which could harm our business. We expect these risks to increase as we expand our international operations. These risks may increase our costs, impact our
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ability
to sell our commercial electric vehicles and require significant management attention. These risks may include:
•
conforming our vehicles to various international regulatory requirements where our vehicles are sold, an undertaking
referred to as homologation;
•
difficulty in staffing and managing foreign operations;
•
foreign government taxes, regulations and permit requirements, including foreign taxes that we may not be able to offset
against taxes imposed upon us in the United States, and foreign tax and other laws limiting our ability to repatriate funds to the United States;
•
fluctuations in foreign currency exchange rates and interest rates, including risks related to any interest rate swap or
other hedging activities we may undertake;
•
our ability to enforce our contractual and intellectual property rights, especially in those foreign countries that do not
respect and protect intellectual property rights to the same extent as do the United States and select European countries, increasing the risk of unauthorized and uncompensated use of our technology;
•
U.S. and foreign customs and trade restrictions, anti-bribery laws, tariffs and price or exchange controls;
•
foreign anti-dumping laws and regulations;
•
foreign labor laws, regulations and restrictions;
•
preferences of foreign nations for domestically produced vehicles;
•
changes in diplomatic and trade relationships;
•
political instability, natural disasters, war or events of terrorism; and
•
the strength of international economies, particularly those in Europe.
We
also face the risk that our foreign currency denominated liabilities will increase if such foreign currencies strengthen quickly and significantly against the U.S. dollar or the
British pound. This risk is particularly acute because we do not currently hedge our foreign currency risk. If the value of the U.S. dollar or the British pound depreciates significantly when compared
to other currencies in which our contracts are denominated, our costs will correspondingly increase and our operating results will be adversely affected.
If
we fail to successfully address these risks, our business, prospects, financial condition and operating results could be adversely affected.
If we determine to grow our business through mergers and acquisitions, we may not realize the anticipated benefits of any transactions we enter into, which could adversely
affect our business, prospects, financial condition and operating results.
We currently, and from time to time in the future may, evaluate opportunities to acquire other companies in order to grow our business,
secure access to technology we use in our business or vertically integrate our company. To the extent that our future growth includes acquisitions, there are no assurances that we will successfully
identify suitable acquisition candidates, consummate such potential acquisitions, integrate any acquired entities or successfully expand into new markets as a result of our acquisitions. Growth
through mergers and acquisitions involves business risks, including unforeseen contingent risks or latent business liabilities that may only become apparent after the merger or acquisition is
completed. The key success factors of any merger and acquisition activity we may undertake will be seamless integration and effective management of the merged/acquired entity, retention of key
personnel, and generating cash flow from synergies in engineering and sourcing, joint sales and marketing efforts, and management of a larger business. If any of these factors fails to
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materialize
or if we are unable to manage any of the associated risks successfully, our business, prospects, financial condition and operating results could be adversely affected.
We are subject to substantial regulation, which is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business
and operating results.
Our commercial electric vehicles, the sale of motor vehicles in general and the electronic components used in our vehicles are subject
to substantial regulation under international, federal, state and local laws. We have incurred, and expect to incur in the future, significant costs in complying with these regulations. Regulations
related to the electric vehicle industry and alternative energy currently are evolving and we face risks associated with changes to these regulations. These risks include the
following:
•
changes to the regulations governing the assembly and transportation of lithium-ion batteries, such as the UN
Recommendations on the Safe Transport of Dangerous Goods Model Regulations or regulations adopted by the U.S. Pipeline and Hazardous Materials Safety Administration, or PHMSA, the E.U. Batteries
Directive, or the E.U. Directive on the Inland Transport of Dangerous Goods could increase the cost of lithium-ion batteries;
•
changes to regulations governing the exportation of our vehicles could increase our costs incurred to deliver products
outside of the United States or the United Kingdom or force us to charge higher prices for our exported vehicles;
•
revisions in motor carrier safety laws in the United States and Europe to further enhance motor vehicle safety generally
and to ensure that electric vehicles achieve levels of safety commensurate with other cars and trucks could increase the costs associated with the component parts and the assembly of our vehicles; and
•
revisions in consumer protection laws to ensure that consumers are fully informed of the particular operational
characteristics of electric vehicles could increase our costs associated with warning labels or other related customer information dissemination.
To
the extent the laws governing our business and vehicles change, some or all of our vehicles may not comply with applicable international, federal, state or local laws, and certain of
the competitive advantages of our vehicles may be reduced or eliminated, which would have an adverse effect on our business. Furthermore, compliance with changing regulations could be burdensome, time
consuming, and expensive. To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition and operating results will be adversely affected.
Vehicle dealer and distribution laws could adversely affect our ability to sell our commercial electric vehicles.
Sales of our vehicles are subject to international, state and local vehicle dealer and distribution laws. To the extent such laws
prevent us from selling our vehicles to customers located in a particular jurisdiction or require us to retain a local dealer or distributor or establish and maintain a physical presence in a
jurisdiction in order to sell vehicles in that jurisdiction, our business, prospects, financial condition and operating results could be adversely affected.
We are subject to various environmental laws and regulations that could impose substantial costs upon us and cause delays in opening our sales, service and assembly
facilities.
We and our operations, both in the United States and abroad, are subject to national, state and/or local environmental laws and
regulations, including laws relating to the use, handling, storage, transportation, disposal and human exposure to hazardous substances and wastes. Environmental and health and safety laws and
regulations can be complex, and we expect that our business and operations will be affected by future amendments to such laws or other new environmental and health and safety laws which may require us
to change our operations. These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury and fines and penalties.
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Capital
and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties, third party damages,
suspension of production or a cessation of our operations.
Our
Kansas City, Missouri production facility previously was operated by third parties, some of whom generated, stored, released, and disposed of hazardous substances at the facility. As
a result of historical operations by third parties, the facility has been subject to corrective action under the Resource Conservation and Recovery Act, as amended, or RCRA, since before we occupied a
portion of the facility. The facility is subject to deed restrictions in connection with the presence of residual contamination and annual groundwater monitoring is conducted by third-parties pursuant
to a RCRA "post-closure" permit issued to American Airlines (a prior occupant) and the City of Kansas City, Missouri (the current property owner).
Contamination
at properties currently or formerly owned and/or operated by us, as well as at properties we will own and/or operate, and properties to which hazardous substances were sent
by us, may result in liability for us under environmental laws and regulations, including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act, as amended, or
CERCLA, also known as the Superfund law. CERCLA and comparable state laws can impose joint and several liability, without regard to fault, for the full cost of investigating and cleaning up hazardous
substances that have been or pose a threat of being released into the environment, for damages to natural resources, and for the costs of certain environmental and health studies. The costs of
complying with U.S. and foreign environmental laws and regulations and any claims concerning noncompliance, or liability with respect to contamination in the future, could have an adverse effect on
our financial condition or operating results. We may not be able to recover some or any of these costs from insurance. Compliance with these laws also may give rise to unexpected delays in opening our
sales, service and assembly facilities, as we may be required to obtain permits and approvals required by environmental laws. For example, the European Union imposes emission limits on and requires
permits for manufacturing facilities that may affect our facilities in the United Kingdom and other possible new sales, service and assembly facilities we wish to establish across Europe. Depending on
capacity, our new facilities may be subject to the stringent permitting and reporting requirements of the Directive on Integrated Pollution Prevention Control, the European Pollutant Release and
Transfer Register, the
Solvent Emissions Directive, the Paints Directive and Directive 2010/75/EU on Industrial Emissions, among others. Furthermore, our European production activities and our vehicles and parts that are
marketed in the European Union and/or European Economic Area, as well as those of our suppliers, are subject to the registration, evaluation, authorization and restriction procedures of the E.U.'s
REACH Regulation for chemicals. Any delays in opening our sales, service and assembly facilities as a result of regulatory challenges could adversely impact our business, prospects and operating
results.
We
are exploring arrangements with third parties to reuse battery packs for secondary applications. Currently, if a customer returns a battery pack from one of our vehicles, we return
the battery pack to our supplier for disposal. If in the future we are required to dispose of the battery packs used in our vehicles and are unable to secure disposal arrangements with third parties,
we may be required to incur significant expenses to dispose of these battery packs in a manner that complies with applicable environmental laws and regulations.
Our business, prospects, financial condition and operating results could be adversely affected if we are unable to secure exclusive, global rights to systems and components
we purchase from our key suppliers.
Our ability to expand our business depends in large part on our ability to obtain exclusive, global rights to the key systems and
components we incorporate in our vehicles. For example, in September 2010, we entered into a development, supply and license agreement with Impact Clean Power Technology S.A., formerly Clean
Power Technical Solutions Sp. z.o.o., or CPTS, under which CPTS granted us an exclusive, non-transferable, sublicensable license to the technology and know-how related to the
battery management system and battery pack assembly that comprises Smith Power for use in
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commercial
electric vehicles in the United States, Canada and Mexico. Subject to CPTS's agreement, we have the ability to expand the scope of the license to cover additional territories; however,
there are no assurances that we will be able to do so on terms acceptable to us or at all. In the event that we are unable to obtain license rights on acceptable terms for additional territories in
which we sell or plan to sell our commercial electric vehicles, any vehicles sold by us in those territories could not include our Smith Power technology. This, in turn, could limit or eliminate our
ability to realize the cost savings we expect from our Smith Power technology and reduce the upfront cost of our vehicles sold in these territories.
Furthermore,
our supply agreement with Avia grants us the exclusive right to sell, service and market Avia's chassis and cabs in the electric vehicle market in North America, provided
that we meet certain minimum annual purchase requirements under the agreement. We currently expect that we will not meet these minimum purchase requirements for 2011 and, if we do not, we will lose
our exclusive rights beginning on January 1, 2012. If we lose our exclusive rights, Avia would be able to sell its chassis and cabs to other electric vehicle manufacturers in North America,
including to our competitors, while
we would continue to be required to exclusively purchase Avia chassis and cabs for the duration of the supply agreement. If Avia sells the chassis and cabs we use in the Smith Newton to one or more of
our competitors, those competitors would receive the benefit of the technological enhancements we have developed with Avia and could produce trucks with a look and feel that is similar to those of our
vehicles, which could dilute our brand. There also is some risk that Avia would allocate production capacity to our competitors before allocating capacity to us, which could result in production
delays for us.
If
any of the circumstances described above were to occur, our business, prospects, financial condition and operating results could be adversely affected.
Our business will be adversely affected if we are unable to protect our technology from unauthorized use or infringement by third parties.
Our success depends, at least in part, on our ability to protect our core technology and know-how. To accomplish this, we
rely primarily on trade secret protection and employee and third party nondisclosure and non-competition agreements. We also rely on intellectual property licenses, other contractual
rights and common law rights to establish and protect our proprietary rights in our technology. We do not own any patents and do not have any patent applications pending with the United States Patent
and Trademark Office, or the USPTO, or applicable foreign patent filing offices. We have entered into intellectual property licenses with third parties in order to obtain the intellectual property
rights necessary to produce our vehicles, including for the battery management system and battery pack and powertrain that form the basis of our Smith Power and Smith Drive technologies as well as for
the wireless data collection system and telemetry hardware that form the basis of our Smith Link technology. We do not have a written agreement with the third-party developer of the message-queuing
software component of Smith Link and may not be able to enter into any such agreement on terms acceptable to us or at all. We recently filed applications to register our adopted marks with the USPTO
and have filed applications for international trademark registration under the Madrid Protocol and in Canada for the mark "Smith." We also are in the process of filing applications to register our
marks in the European Union and other designated countries around the world. We previously relied on common law trademark protections for our adopted marks in the countries in which such protections
are available.
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The protection provided by intellectual property law is and will be important to our future opportunities. However, such laws and other measures we take to
protect our intellectual property from use by others may not be effective for various reasons, including the following:
•
the costs associated with enforcing our intellectual property rights may make aggressive enforcement impracticable;
•
current and future competitors may independently develop similar technology, duplicate our vehicles or design new vehicles
in a way that circumvents our intellectual property rights;
•
our in-licensed intellectual property rights may be invalidated or terminated, the holders of these
intellectual property rights may seek to breach our license arrangements, or the holders of these intellectual property rights may license these rights to current and future competitors without
breaching our license arrangements;
•
any patent or trademark applications we file may not result in the issuance of patents or trademarks;
•
patents, if issued, may not be broad enough to protect our proprietary rights; and
•
patents we in the future may be granted may be challenged, invalidated or circumvented because of the
pre-existence of similar patented or unpatented intellectual property rights or for other reasons.
Trade
secrets, in particular, are difficult to protect. We rely in part on nondisclosure and non-competition agreements with our employees, contractors, consultants and other
advisors to protect our trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in
the event of unauthorized disclosure of confidential information. Additionally, others may independently discover our trade secrets or independently develop processes or products that are similar or
identical to our trade secrets, and courts outside of the United States and United Kingdom may be less willing to protect trade secrets. Costly and time-consuming litigation could be
necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
Any
failure to protect our proprietary rights adequately could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage
and a decrease in our revenue, which would adversely affect our business, prospects, financial condition and operating results.
The U.S. federal government's rights under the DOE EV Demonstration Project could adversely affect our business, financial condition and operating results.
The grant agreement that governs our participation in the DOE's EV Demonstration Project provides that, subject to certain conditions,
we may elect to retain title to any inventions conceived of or first actually reduced to practice under or during the performance of the agreement, or subject inventions. We must, however, grant the
U.S. federal government a paid-up, nonexclusive, irrevocable, worldwide license to use (or to authorize third parties to use on behalf of the federal government) such subject inventions.
The grant agreement also provides the U.S. federal government with unlimited rights in the data first produced in the performance of the grant agreement or delivered to the DOE under the agreement,
which include the right to use, disclose, reproduce, prepare derivative works, and distribute copies to the public, in any manner and for any purpose, and to have or permit others to do so. These
rights may compromise our ability to protect these inventions and data as trade secrets. Furthermore, the grant agreement requires us to substantially manufacture products that incorporate the subject
inventions in the United States, unless we obtain a waiver of this requirement. The federal
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government's
intellectual property rights and approval rights over where we manufacture products that incorporate subject inventions could limit our ability to fully exploit the technology created
under the EV Demonstration Project and reduce our vehicle production costs, which could adversely affect our business, financial condition and operating results.
We may need to defend ourselves against intellectual property infringement claims, which may be time-consuming and would cause us to incur substantial costs.
Companies, organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights
that would prevent, limit or interfere with our ability to produce, use, develop or sell our vehicles or components, which could make it more difficult for us to operate our business. From time to
time, we may receive infringement claims from third parties relating to our vehicles and technologies. In those cases, we intend to investigate the validity of the claims and, if we believe the claims
have merit, to respond through licensing or other appropriate actions. If we are determined to have infringed upon a third party's intellectual property rights, we may be required to do one or more of
the following:
•
cease producing, using, developing or selling vehicles that incorporate the challenged intellectual property;
•
pay substantial damages;
•
obtain a license from the holder of the infringed intellectual property right, which license may not be available on
reasonable terms or at all; or
•
redesign our vehicles.
In
the event of a successful infringement claim against us and our inability to obtain a license to the infringed technology, our business, prospects, financial condition and operating
results could be adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs and diversion of resources and management attention.
Our commercial electric vehicles make use of lithium-ion battery cells, which, if not appropriately managed and controlled, on rare occasions have been observed
to catch fire or vent smoke and flames. If any such events occur in our commercial electric vehicles, we could face liability for damage or injury, adverse publicity and a potential safety recall, any
of which could adversely affect our business, prospects, financial condition and operating results.
The battery packs in our commercial electric vehicles use lithium-ion cells, which have been used for years in laptop
computers and cell phones. On rare occasions, if not appropriately managed and controlled, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a
manner that can ignite nearby materials. Highly publicized incidents of laptop computers and cell phones bursting into flames have focused consumer attention on the safety of these cells. These events
also have raised questions about the suitability of these lithium-ion cells for automotive applications. There can be no assurance that a field failure of our battery packs will not occur,
which could damage the vehicle or lead to personal injury or death and may subject us to lawsuits. Furthermore, there is some risk of electrocution if individuals who attempt to repair battery packs
on our vehicles do not follow applicable maintenance and repair protocols. Any such damage or injury would likely lead to adverse publicity and potentially a safety recall. Any such adverse publicity
could adversely affect our business, prospects, financial condition and operating results.
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We may become subject to product liability claims, which could adversely affect our financial condition and liquidity if we are not able to successfully defend or insure
against such claims.
Although we have not been subject to any product liability claims to date, we could become subject to such claims in the future, which
could harm our business, prospects, financial condition and operating results. The motor vehicle industry experiences significant product liability claims and we face inherent risk of exposure to
claims in the event our vehicles do not perform as expected or malfunction and personal injury or death results. Our risks in this area are particularly pronounced given the limited field experience
of our commercial electric vehicles and vehicle technologies. A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim
could generate substantial negative publicity about our commercial electric vehicles and business, which could have an adverse impact on our brand, business, prospects and operating results. We
maintain product liability insurance for all of our vehicles with annual limits of $6.0 million on a claims made basis, but there is no assurance that our insurance will be sufficient to cover
all potential product liability claims. Any lawsuit seeking significant monetary damages either in excess of our coverage, or outside of our coverage, may have an adverse effect on our reputation,
business and financial condition. We may not be able to secure additional product liability insurance coverage on commercially acceptable terms or at reasonable costs when needed, particularly if we
do face liability for our vehicles and are forced to make a claim under our policy.
Our business may be adversely affected by union activities.
None of our full-time U.S. employees currently are represented by a labor union, while approximately 17% of our full-time U.K.
employees are represented by a labor union. Many manufacturers in the U.S. motor vehicle industry employ unionized workforces, which can result in higher employee costs and increased risk of work
stoppages. As we expand our business, there can be no assurances that our employees will not join or form a labor union, more of our U.K. employees will not join our existing labor union or
that we will not be required to become a union signatory. We also are directly or indirectly dependent upon companies with unionized work forces, such as parts suppliers and trucking and freight
companies, and work stoppages or strikes organized by such unions could have a material adverse impact on our business, financial condition or operating results. If a work stoppage occurs, whether at
one of our facilities or a supplier's facility, it could delay the production and sale of our commercial electric vehicles and have an adverse effect on our business, prospects, financial condition
and operating results.
Our facilities could be damaged or adversely affected as a result of disasters or other unpredictable events. Any prolonged disruption in the operations of our facilities
would adversely affect our business, prospects, financial condition and operating results.
We assemble our electric vehicles in facilities located in Kansas City, Missouri and outside of Newcastle, England. Any prolonged
disruption in the operations of our
production facilities, whether due to technical or labor difficulties, disruptions in our information systems or communications network, accidents, weather conditions, terrorist activity, natural
disaster or otherwise, whether short- or long- term, would adversely affect our business, prospects, financial condition and operating results.
RISKS RELATED TO THIS OFFERING AND OWNERSHIP OF OUR COMMON STOCK
We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our
operating results.
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company,
including costs associated with public company reporting and corporate governance requirements. These requirements include compliance with Section 404 and other
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provisions
of the Sarbanes-Oxley Act, as well as SEC and Nasdaq rules. Additionally, our management team will have to adapt to operating a public company. If these requirements divert our management's
attention from other business concerns, they could have an adverse effect on our business, prospects, financial condition and operating results. We expect complying with these rules and regulations
will substantially increase our legal and financial compliance costs and make some activities more time-consuming and costly. We currently are unable to estimate these costs with any
degree of certainty.
We
also expect that it may be more difficult and more expensive for us as a public company to obtain director and officer liability insurance, and we may be required to accept reduced
policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve
on our board of directors or as our executive officers.
An active, liquid and orderly trading market for our common stock may not develop, and you may not be able to resell your shares at or above the initial public offering
price.
Prior to this offering, there has been no public market for shares of our common stock. The initial public offering price of our common
stock will be determined through negotiation with the underwriters, but this price may not necessarily reflect the price at which investors in the market will be willing to buy and sell shares of our
common stock following this offering. In the absence of an active trading market for our common stock, investors may not be able to sell their shares of our common stock at or above the initial
offering price or at the time they would like to sell.
Our stock price may be volatile, and the market price of our common stock after this offering may drop below the price you pay.
The market price of our common stock could be subject to significant fluctuations after this offering, and it may decline below the
initial public offering price. Market prices for securities of early stage companies have historically been particularly volatile. As a result of this volatility, you may not be able to sell your
common stock at or above the initial public offering price. Some of the factors that may cause the market price of our common stock to fluctuate include:
•
fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to
us;
•
fluctuations in our recorded revenue, even during periods of significant sales order activity;
•
changes in estimates of our financial results or recommendations by securities analysts;
•
failure of any of our vehicles to achieve or maintain market acceptance;
•
product liability issues involving our vehicles or our competitors' vehicles;
•
changes in market valuations of similar companies;
•
success of competitive vehicles or vehicle technologies;
•
changes in our capital structure, such as future issuances of securities or the incurrence of debt;
•
announcements by us or our competitors of significant services, contracts, acquisitions or strategic alliances;
•
regulatory developments in the United States, foreign countries or both;
•
litigation involving us, our general industry or both;
•
additions or departures of key personnel;
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•
investors' general perception of us; and
•
changes in general economic, industry and market conditions.
In
addition, if the market for electric vehicle or alternative energy stocks or the stock market in general experiences a loss of investor confidence, the trading price of our common
stock could decline for reasons unrelated to our business, financial condition or operating results. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to class
action lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.
Tanfield beneficially owns a significant amount of our common stock, which may depress the trading price of our common stock or prevent new investors from influencing
significant corporate decisions.
Upon completion of this offering, Tanfield will beneficially own approximately        % of our outstanding shares of common
stock, assuming the underwriters do not exercise their over-allotment option, and approximately        % of our outstanding shares of common stock, if the underwriters'
over-allotment option is exercised in full. Tanfield's ownership percentage may adversely affect the trading price of our common stock because investors often perceive disadvantages in
owning stock in companies that have a significant ownership concentration in a single stockholder or group of stockholders. As a result of its ownership concentration, Tanfield will be able to
significantly influence the outcome of all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant
corporate transactions. Tanfield's exercise of this influence could have the effect of delaying or preventing a change of control of us or changes in directors or management and will make the approval
of certain transactions difficult or impossible without Tanfield's support. Tanfield may sell a portion of its shares in this offering.
A total of            , or        %, of the total outstanding shares of our common stock after the offering are restricted from
immediate resale, but may be sold
in the public markets in the near future. The large number of shares eligible for public sale or subject to rights requiring us to register them for public sale could depress the market price of our
common stock.
The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market
after this offering, and the perception that these sales could occur also may depress the market price of our common stock. We will have                
shares of common stock outstanding after this offering, assuming the underwriters do not exercise their over-allotment option, and                shares of common stock
outstanding after
this offering, assuming the underwriters exercise their over-allotment option in full. Of these shares, the common stock sold in this offering will be freely tradable in the United States,
except for any shares purchased by our "affiliates," as defined in Rule 144 under the Securities Act of 1933. The holders of                shares of our outstanding
common stock have agreed
with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock during the 180-day period (and with respect to Tanfield, which holds
                shares of our outstanding common stock, the 365-day period) beginning on the date of this prospectus, except with the prior written consent each of UBS
Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated. After the expiration of the 180-day (or, with respect to Tanfield, 365-day) restricted
period, these shares may be sold in the public market in the United States, subject to prior registration in the United States, if required, or reliance upon an exemption from U.S. registration,
including, in the case of shares held by affiliates or control persons, compliance with the volume restrictions of Rule 144.
Subject
to the lock-up period discussed above, following the six-month anniversary of the closing of this offering (or with respect to Tanfield, following the
12-month anniversary of the closing of this offering), and after giving effect to the automatic exercise, on a net exercise basis, of the 2011 warrants upon the pricing of this offering,
conversion of our Series B preferred stock and Series C preferred into
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common
stock immediately prior to the closing of this offering and
the                        for                
        stock split of our outstanding common stock effected on                        ,
stockholders owning
an aggregate of                shares, or                shares, including shares held by
Tanfield, will have rights, subject to certain conditions, to require us to file registration statements
with the SEC covering their shares and to include their shares in registration statements that we may file on our own behalf or on behalf of other of our stockholders. In addition, we intend to
file a registration statement to register the                shares of our common stock previously issued or reserved for future issuance under our equity
compensation plans and agreements.
Upon effectiveness of that registration statement, subject to the satisfaction of applicable exercise periods and lock-up agreements with the representatives of the underwriters referred
to above,                shares of common stock issued upon exercise of our outstanding stock options will be available for resale in the United States in the open
market.
Sales
of our common stock as restrictions end or pursuant to registration rights may make it more difficult for us to sell equity securities in the future at a time and at a price that
we deem appropriate. These sales also could cause our stock price to fall and make it more difficult for you to sell shares of our common stock.
Anti-takeover provisions contained in our certificate of incorporation and by-laws and provisions of Delaware law, as well as our stockholder rights
plan, could deter a change in control of us.
Our certificate of incorporation and by-laws, which will be in effect immediately following this offering, Delaware law and
our stockholder rights plan contain provisions which could have the effect of rendering more difficult, delaying or preventing an acquisition of us deemed undesirable by our board of directors. Our
corporate governance documents include provisions:
•
creating a classified board of directors whose members serve staggered three-year terms;
•
providing that our directors may be removed by stockholders only for cause;
•
authorizing "blank check" preferred stock, which could be issued by our board without stockholder approval and may contain
voting, liquidation, dividend and other rights superior to those of our common stock;
•
limiting the liability of, and providing indemnification to, our directors and officers;
•
limiting the ability of our stockholders to call and bring business before special meetings and to take action by written
consent in lieu of a meeting;
•
requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for
nominations of candidates for election to our board of directors;
•
controlling the procedures for the conduct and scheduling of board and stockholder meetings;
•
providing the board of directors with the express power to postpone previously scheduled annual meetings and to cancel
previously scheduled special meetings; and
•
requiring the affirmative vote of 75% of our capital stock entitled to vote generally in the election of directors to
amend certain of the provisions described above.
These
provisions, alone or together, could delay or prevent hostile takeovers and changes in control of us or changes in our management.
Our
board of directors also has adopted a stockholder rights plan, which will become effective upon the closing of this offering and which could have the effect of discouraging third
parties from attempting to acquire us without the prior approval of our board. See "Description of Capital Stock—Anti-Takeover Considerations—Stockholder rights
plan" for more information about our stockholder rights plan.
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As
a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law, which prevents some stockholders holding more than 15% of our outstanding common
stock from engaging in certain business combinations with us without approval of the holders of substantially all of our outstanding common stock.
Any
provision of our certificate of incorporation or by-laws, Delaware law or our stockholder rights plan that has the effect of delaying or deterring a change in control of
us could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common
stock.
Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.
The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our
outstanding common stock immediately after this offering. Therefore, if you purchase our common stock in this offering, you will incur immediate dilution of $            in net tangible book
value
per share from the price you paid. Additionally, following this offering, purchasers in this offering will have contributed        % of the total consideration paid by our stockholders to
purchase shares of common stock, in exchange for acquiring approximately        % of our total outstanding shares as of June 30, 2011, after giving effect to this offering, the automatic
exercise, on a net exercise basis, of the 2011 warrants upon the pricing of this offering, the conversion immediately prior to the closing of this offering of all of the outstanding shares of our
Series B preferred stock and Series C preferred stock and the            for            stock split of our outstanding
common stock effected on                        . Any exercise of
outstanding stock options and/or conversion of Series A debentures into shares of common stock will result in further dilution. See "Dilution" for a further description of the dilution that
purchasers in this offering will experience immediately after this offering.
The terms of any indebtedness we incur and any preferred securities that we issue could adversely affect our common stockholders.
We anticipate that in the future we will enter into credit facilities and incur other indebtedness the terms of which may limit our
ability to pay dividends on our common stock. Furthermore, our certificate of incorporation provides our board of directors with the ability to issue up to 5,000,000 shares of preferred stock having
rights and preferences determined by our board at the time such preferred stock is issued. Holders of any such preferred stock could rank senior to our common stockholders with respect to the
distribution of our assets upon any liquidation of us and the receipt of dividends. Any debt or preferred equity securities that we may issue in the future also may be convertible into shares of our
common stock, which would dilute the ownership interests of our common stockholders, perhaps materially. If we were to enter into any such debt facilities or issue any such debt or preferred
securities, the rights of our common stockholders may be adversely affected.
If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they downgrade their recommendations
regarding our stock, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish
about us, our business, our market or our competitors. If any of the analysts who may cover us downgrade their recommendation regarding our stock, or provide more favorable relative recommendations
about our competitors, our stock price likely would decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports about us, we could lose
visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
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Our management will have broad discretion over the use of the proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your
investment.
Our management will have broad discretion over the use of our net proceeds from this offering and you will be relying on the judgment
of our management regarding the application of these proceeds. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. We expect to use
$             million of the net proceeds to us from this offering to redeem $             million in principal amount
of our outstanding Series A debentures. We expect the
remainder of the net proceeds to us of this offering to be used for general corporate purposes, including working capital and capital expenditures, which may include the opening of our sales, service
and assembly facilities and investments in, or acquisitions of, complementary businesses, services or technologies. Our management's investment of these net proceeds may not yield a significant, or
any, return. You will not have the opportunity to influence our decisions on how to use our net proceeds from this offering.
After the completion of this offering, we do not expect to declare any cash dividends in the foreseeable future.
After the completion of this offering, we do not anticipate declaring any cash dividends to holders of our common stock in the
foreseeable future. Consequently, investors may need to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their
investment. Investors seeking cash dividends should not purchase our common stock.
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FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. Forward-looking statements include all statements that are not historical facts,
including, without limitation, statements regarding our future financial position, prospects, business strategy, budgets, pending acquisitions, recent acquisitions and divestitures, project costs and
plans and objectives for future operations, and statements pertaining to future development activities and costs. The words "estimate," "project," "predict," "contemplate," "continue," "believe,"
"expect," "anticipate," "potential," "could," "may," "foresee," "plan," "goal," "will," "should" and "intend" and similar expressions will generally identify forward-looking statements.
These
statements involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially
from those expressed or implied by these forward-looking statements. Such forward-looking statements are based on assumptions and beliefs that we believe to be reasonable; however, assumed facts
almost always vary from actual results, and the differences between assumed facts and actual results can be material, depending upon the circumstances. We cannot assure you that the stated expectation
or belief will occur or be achieved or accomplished.
Our
forward-looking statements are expressly qualified by these cautionary statements and any other cautionary statements that may accompany those statements. Because forward-looking
statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as guarantees of future events.
With this in mind, you should carefully consider the risks discussed in the "Risk Factors" section of this prospectus and other disclosures about us that are included in this prospectus. The
forward-looking statements in this prospectus represent our views only as of the date of this prospectus, and we undertake no obligation to update or revise any forward-looking statements to reflect
events or circumstances after the date of this prospectus.
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USE OF PROCEEDS
We estimate that the net proceeds to us from this offering will be approximately
$                  and the net proceeds to the selling
stockholders will be approximately $                  , based on an assumed initial public offering price of
$          per share (the mid-point of the price range set forth on the
cover page of this prospectus), after deducting underwriting discounts and commissions and estimated offering expenses.
We
will not receive any proceeds from the sale of shares of common stock by the selling stockholders, including any shares of common stock sold by the selling stockholders in connection
with the underwriters' exercise of their over-allotment option, although we will bear the costs, other than underwriting discounts and commissions, associated with the sale of these
shares. The selling stockholders include certain of our executive officers and members of our board of directors and entities affiliated with or controlled by them.
We
intend to use $         million of the net proceeds to us from this offering to redeem $         million in principal amount of our outstanding
Series A debentures. The Series A debentures bear interest at 10% per annum and mature at various dates in 2014.
We
intend to use the remainder of the net proceeds to us from this offering for capital expenditures, working capital and other general corporate purposes, including the continued
development of our technology and establishment of our sales, service and assembly facilities. Such uses may include the continuous development of our Smith Power, Smith Drive and Smith Link
technologies, the expansion
of our research and development facilities, including for battery testing and powertrain, gearbox and telemetry development, and the development of our current and anticipated vehicle platforms.
Some
of the other principal purposes of this offering are to create a public market for our common stock, increase our visibility in the marketplace and provide liquidity to existing
stockholders. A public market for our common stock will facilitate future access to public equity markets and enhance our ability to use our common stock as a means of attracting and retaining key
employees and as consideration for strategic transactions. Depending on the future demand for our vehicles and the pace at which we expand our production, sales and service capacity, we may seek to
raise additional capital to fund our expansion.
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DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock and do not expect to pay any cash dividends for the foreseeable
future. We intend to use future earnings, if any, in the operation and expansion of our business. Payment of future cash dividends, if any, will be at the discretion of our board of directors and
subject to compliance with applicable law, and will depend on our financial condition, recent and expected operating results, capital requirements, general business conditions, restrictions imposed by
lenders, if any, and such other factors our board of directors may deem relevant.
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and our capitalization as of June 30,
2011:
•
on an actual basis; and
•
on a pro forma basis to reflect:
•
the filing of our certificate of incorporation;
•
the conversion of all of our outstanding shares of Series B preferred stock into 4,809,007 shares of our common
stock, based on the one-to-one conversion ratio in effect as of June 30, 2011; and
•
the      for      stock split of our outstanding common stock effected
on                        ; and
•
on a pro forma, as adjusted basis to reflect the pro forma adjustments described above, our receipt of the estimated net
proceeds to us from this offering, based on an assumed initial public offering price of $            per share (the mid-point of the price range set forth on the cover page of this
prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, and our use of such net proceeds to us as described in "Use of
Proceeds."
The
pro forma and pro forma, as adjusted information below is illustrative only and our capitalization following the completion of this offering will be adjusted based on the actual
initial public offering price and other terms of this offering determined at pricing. You should read this table together with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and our financial statements and the accompanying notes appearing elsewhere in this prospectus.
As of June 30, 2011
Actual
Pro forma
Pro forma,
as adjusted
(unaudited)
(in thousands, except share
and per share data)
Cash and cash equivalents
$
7,227
$
$
Note payable—Tanfield
$
7,750
Series A debentures, net of discount
$
10,031
$
Series B convertible redeemable preferred stock, $0.001 par value per share; 6,600,000 shares authorized, 4,809,007 shares issued and outstanding,
actual; no shares authorized, no shares issued and outstanding, pro forma and pro forma, as adjusted
$
56,688
Stockholders' deficit:
Common stock, $0.001 par value per share; 20,000,000 shares authorized, 10,507,929 issued and outstanding, actual; 200,000,000 shares authorized,
                   shares issued and outstanding, pro forma; and 200,000,000 shares authorized,
                   shares issued and outstanding, pro forma, as adjusted
11
Preferred stock, $0.001 par value per share; no shares authorized, issued and outstanding, actual; 5,000,000 shares authorized, no shares issued and
outstanding, pro forma and pro forma, as adjusted
—
Additional paid-in capital
2,997
Common stock warrant
23
Accumulated other comprehensive loss
(2,540
)
Accumulated deficit
(74,183
)
Total stockholders' (deficit) equity
(73,692
)
Total capitalization
$
777
$
$
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Each $1.00 increase or decrease in the assumed initial public offering price of $            per share (the mid-point of the
price
range set forth on the cover page of this prospectus) would increase or decrease, as applicable, our pro forma, as adjusted cash and cash equivalents, additional paid-in capital and
stockholders' equity by approximately $         million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after
deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The
pro forma column and the pro forma, as adjusted column in the table above do not include:
•
714,688 shares of our common stock issuable upon the exercise of options outstanding as of June 30, 2011 at a
weighted average exercise price of $7.98 per share;
•
938,000 shares of our common stock issuable upon the exercise of options issued after June 30, 2011 at a weighted
average exercise price of $12.33 per share;
•
shares of our common stock issuable upon conversion of
$            in principal amount of our
outstanding Series A debentures at an assumed conversion price of $            , which is 80% of the mid-point of the price range listed on the cover page of this prospectus;
•
726,960 shares of our common stock issuable upon the exercise, on a net exercise basis, of the 2011 warrants at a weighted
average exercise price of $12.38 per share;
•
the issuance in November 2011 of shares of our Series C preferred stock and the conversion of such shares into
2,431,170 shares of our common stock, based on a one-to-one conversion ratio; and
•
3,000,000 shares of our common stock reserved for future issuance under our 2012 Incentive Plan, which will become
effective in connection with the consummation of this offering.
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DILUTION
If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference
between the initial public offering price per
share and the net tangible book value per share of our common stock after this offering. Our pro forma net tangible book value as of June 30, 2011 was $         million, or
$            per share of our common stock. Pro forma net tangible book value per share represents the amount of our total tangible assets less our total liabilities, divided by the total
number
of shares of our common stock outstanding, after giving effect to the automatic conversion of all of the outstanding shares of our Series B preferred stock into common stock immediately prior
to the closing of this offering and the            for            stock split of our outstanding common stock effected
on                        .
After
giving effect to the sale by us of                  shares of our common stock in this offering at an assumed initial public offering price of
$            per share, which is
the mid-point of the price range listed on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us, our
pro forma net tangible book value as of June 30, 2011 would have been approximately $         million, or $            per share of our
common stock. This amount represents an
immediate increase in our pro forma net tangible book value of $            per share to our existing stockholders and an immediate dilution in our pro forma net tangible book value of
$            per share to new investors purchasing shares of our common stock in this offering at the initial public offering price.
The
following table illustrates this dilution on a per share basis:
Assumed initial public offering price per share
$
Pro forma net tangible book value per share as of June 30, 2011
$
Increase per share attributable to this offering
Pro forma net tangible book value per share after this offering
$
Dilution per share to new investors
$
An
initial public offering price of $            per share, which is the bottom of the price range listed on the cover page of this prospectus, would decrease our pro forma net
tangible book value per share after this offering by approximately $            and would decrease dilution per share to new investors by approximately
$            , assuming that the number
of shares offered by us, as listed on the cover page of this prospectus, remains the same. Additionally, to the extent any outstanding options are exercised, new investors will experience further
dilution.
An
initial public offering price of $            per share, which is the top of the price range listed on the cover page of this prospectus, would increase our pro forma net tangible
book value per share after this offering by approximately $            and would increase dilution per share to new investors by approximately
$            , assuming that the number of shares
offered by us, as listed on the cover page of this prospectus, remains the same.
If
the underwriters exercise their over-allotment option in full, the pro forma net tangible book value per share after this offering will increase to $            per
share, representing an immediate increase to existing stockholders of $            per share and an immediate dilution of
$            per share to new investors. If any shares are issued upon
exercise of outstanding options, you will experience further dilution.
The
following table summarizes, as of June 30, 2011, the number of shares purchased or to be purchased from us, the total consideration paid or to be paid to us, and the average
price per share paid or to be paid to us by existing stockholders and new investors purchasing shares of our common stock in this offering at an assumed initial public offering price of
$            per share, which is the
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mid-point
of the price range listed on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
As the table below shows, new investors purchasing shares of our common stock in this offering will pay an average price per share substantially higher than our existing stockholders paid.
Shares Purchased
Total Consideration
Average Price
Per Share
Number
Percent
Amount
Percent
Existing stockholders
%
$
%
$
New investors
Total
%
$
%
$
The
percentage of shares purchased from us by existing stockholders is based on                  shares of our common stock outstanding as of June 30, 2011,
after giving effect to
the automatic conversion of all of the outstanding shares of our Series B preferred stock into common stock immediately prior to the closing of this offering and the      for
      stock split of our outstanding common stock effected on                        . This number
excludes:
•
714,688 shares of our common stock issuable upon the exercise of options outstanding as of June 30, 2011 at a
weighted average exercise price of $7.98 per share;
•
938,000 shares of our common stock issuable upon the exercise of options issued after June 30, 2011 at a weighted
average exercise price of $12.33 per share;
•
shares of our common stock issuable upon conversion of
$            in principal amount of our
outstanding Series A debentures at an assumed conversion price of $            , which is 80% of the mid-point of the price range listed on the cover page of this prospectus;
•
726,960 shares of our common stock issuable upon the exercise, on a net exercise basis, of the 2011 warrants at a weighted
average exercise price of $12.38 per share; and
•
the issuance in November 2011 of shares of our Series C preferred stock and the conversion of such shares into
2,431,170 shares of our common stock, based on a one-to-one conversion ratio; and
•
3,000,000 shares of our common stock reserved for future issuance under our 2012 Incentive Plan, which will become
effective in connection with the consummation of this offering.
If
all of our Series A debentures had been converted to shares of common stock (using the if-converted method), assuming a conversion price of $            , which
is 80% of the mid-point of the price range listed on the cover page of this prospectus, and all of our outstanding stock options had been exercised (using the treasury stock method), in
each case, as of June 30, 2011, our pro forma net tangible book value as of June 30, 2011 would have been approximately $         million, or
$            per share of
our common stock, and the pro forma net tangible book value after giving effect to this offering would have been $            per share, representing dilution in our pro forma net tangible
book
value per share to new investors of $            .
The
sale of                  shares of our common stock to be sold by the selling stockholders in this offering will reduce the number of shares of our common stock
held by existing
stockholders to                  , or        % of the total shares outstanding, and will increase the number of shares
of our common stock held by new investors to                  , or
        % of the total shares outstanding.
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SELECTED HISTORICAL FINANCIAL DATA
The following selected historical financial data should be read together with our financial statements and the accompanying notes
appearing elsewhere in this prospectus and "Management's Discussion and Analysis of Financial Condition and Results of Operations." The selected historical financial data in this section is not
intended to replace our historical financial statements and the accompanying notes. Our historical results are not necessarily indicative of our future results.
We
derived the statement of operations data for 2008, 2009 and 2010 and the balance sheet data as of December 31, 2009 and 2010 from our audited financial statements appearing
elsewhere in this prospectus. The statement of operations data for the six months ended June 30, 2010 and 2011 and the balance sheet data as of June 30, 2011 are derived from our
unaudited interim financial statements appearing elsewhere in this prospectus. The balance sheet data as of December 31, 2008 is unaudited and has been derived from accounting records of
Tanfield that are not included elsewhere in this prospectus. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the
opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to state fairly our financial position as of June 30, 2011 and results of operations
for the six months ended June 30, 2010 and 2011. Operating results for
the six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011.
We
completed the acquisition of Smith UK on January 1, 2011. As a result of the conclusion that Smith and Smith UK were under common control for the historical periods, their
results have been combined for the 2009 and 2010 periods. All results subsequent to the acquisition on January 1, 2011 have been consolidated. The balance sheet data with respect to Smith UK as
of December 31, 2008, 2009 and 2010 and the statement of operations data for the periods then ended have been derived from Tanfield's accounting records as of and for such periods. Our
historical combined financial statements may not reflect what our financial position, results of operations and cash flows would have been had we operated as a separate, standalone company without the
shared resources of Tanfield in the predecessor periods.
The
selected historical financial data as of and for Smith UK's fiscal years ended December 31, 2007 and 2006 has been omitted because it is not available without the expenditure
of unreasonable effort and expense. A combination of factors results in our inability to provide the 2007 and 2006 selected balance sheet and statement of operations information without unreasonable
effort and expense. These factors include:
•
Smith UK was part of Tanfield prior to January 2011;
•
Tanfield did not prepare stand-alone financial statements for Smith UK for the years ended December 31, 2007 and
2006 and there was no requirement to complete such as part of the sale to us;
•
Tanfield did not prepare separate trial balances and related entries for Smith UK for the years ended December 31,
2007 and 2006, which would be required in order to prepare financial statements for Smith UK from which selected financial data could be derived for those years;
•
Tanfield's 2007 and 2006 financial information was prepared to comply with International Financial Reporting Standards
rather than GAAP;
•
due to the conversion to new accounting systems during 2007 and 2008, information to support the development of GAAP basis
financial information, as well as supplemental information required to make informed judgments related to accounting estimates, for 2006 and 2007, is not available without unreasonable effort and
expense;
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•
we are not in a position to independently ascertain whether the information necessary to calculate the
carve-out financial information continues to be available from Tanfield and Tanfield is under no obligation to provide us with such information; and
•
we believe the omission of the 2007 and 2006 selected financial data does not have a material impact on the understanding
of our results of operations, financial condition, liquidity and operating trends.
Years ended December 31,
Six Months ended
June 30,
2010
2009
2008
2011
2010
(in thousands, except share and per share amounts)
Combined and Consolidated Statement of Operations Data:
Revenue
Vehicle(1)
$
23,827
$
8,223
$
14,166
$
31,930
$
9,633
Service and repairs(2)
11,767
14,631
18,208
5,672
6,191
Total revenue
35,594
22,854
32,374
37,602
15,824
Cost of revenue
Vehicle
33,117
13,370
21,671
40,035
12,335
Service and repairs
12,175
14,421
18,124
5,945
6,165
Total cost of revenue
45,292
27,791
39,795
45,980
18,500
Gross loss
(9,698
)
(4,937
)
(7,421
)
(8,378
)
(2,676
)
Research and development expense
2,550
1,126
9,478
1,457
830
Selling, general and administrative
13,307
10,697
5,411
7,031
4,360
Total operating expenses
15,857
11,823
14,889
8,488
5,190
Operating loss
(25,555
)
(16,760
)
(22,310
)
(16,866
)
(7,866
)
Other expense (income)
Interest expense
3,699
696
—
1,881
1,225
Government grant reimbursements
(688
)
(18
)
—
(205
)
(315
)
Loss on extinguishment of debt
—
—
—
971
—
Other expense, net
1,698
60
—
1,763
745
Net loss
$
(30,264
)
$
(17,498
)
$
(22,310
)
$
(21,276
)
$
(9,521
)
Net loss per share of common stock, basic and diluted(3)(4)
$
(2.95
)
$
(1.89
)
N/A
$
(2.05
)
$
(0.94
)
Shares used in computing net loss per share of common stock, basic and diluted(3)(4)
10,258
9,271
N/A
10,381
10,133
Pro forma net loss per share of common stock, basic and diluted(3)(5)
$
$
$
$
$
Shares used in computing pro forma net loss per share of common stock, basic and diluted(3)(5)
(1)
Vehicle
revenue consists of revenues derived primarily from the sale of our Newton and Edison vehicles. Vehicle revenue also includes payments received by
us in connection with Smith Europe's, and previously Smith UK's, distribution of forklifts.
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(2)
Service
and repairs revenue consists of revenues derived from the provision of fleet maintenance and repair services. These services, which are primarily
provided in the United Kingdom, include services for traditional diesel-fueled vehicles as well as for electric vehicles.
(3)
Our
basic net loss per share of common stock is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for
the period. The diluted net loss per share of common stock is computed by dividing the net loss by the weighted-average number of shares of common stock and, if dilutive, potential shares of common
stock outstanding during the period. Potential shares of common stock consist of stock options and warrants to purchase shares of our common stock (using the treasury stock method) and the conversion
of our Series B preferred stock, 12% senior unsecured convertible promissory bridge notes and Series A debentures (using the if-converted method). As we generated a loss in
each period, the potential shares of common stock would have reduced our per share loss (antidilutive) and, therefore, were excluded from the calculation.
(4)
Smith
Electric Vehicles Corp. was not incorporated until January 2009. Smith UK, the predecessor entity, was, in part, a division of Tanfield and, in
part, a wholly-owned subsidiary of Tanfield and did not have separately issued stock. As a result, we are unable to calculate loss per share of common stock for the year ended December 31,
2008. See Note 1, "Nature of Business and Presentation" to the combined and consolidated financial statements included elsewhere in this prospectus for information regarding our acquisition of
Smith UK.
(5)
Pro
forma net loss per share of common stock, basic and diluted includes shares of common stock issuable upon the automatic conversion of all of the
outstanding shares of our Series B preferred stock into shares of our common stock, at a one-to-one conversion ratio, immediately prior to the closing of this offering,
and the      for      stock split of our outstanding common stock effected
on                        .
December 31,
June 30,
2011
2010
2009
2008
(in thousands)
Combined and Consolidated Balance Sheet Data:
Cash and cash equivalents
$
1,000
$
1,183
$
280
$
7,227
Property, plant and equipment, net
3,611
2,912
2,501
4,747
Working (deficit) capital
(29,304
)
(548
)
1,550
(2,918
)
Total assets
30,323
16,334
11,804
38,394
Bridge notes, net of discount
13,055
—
—
—
Bridge note detachable warrants
3,039
—
—
—
Note payable—Tanfield
—
—
—
7,750
Series A debentures, net of discount
9,859
8,930
—
10,031
Series A conversion option
2,612
1,340
—
3,052
Series B convertible redeemable preferred stock
—
—
—
56,688
Common stock warrant
23
37
—
23
Total stockholders' equity (deficit)
(42,431
)
(12,621
)
2,523
(73,692
)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read together with the
financial statements and related notes that are included elsewhere in this prospectus. This discussion contains forward-looking statements based upon current expectations that involve risks and
uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" or in
other parts of this prospectus.
OVERVIEW
We design, produce, sell and service zero-emission commercial electric vehicles designed to be a superior performing
alternative to traditional diesel trucks due to higher efficiency and lower total cost of ownership. We believe we are the only vehicle
manufacturer selling to major commercial fleets in the United States and Europe that exclusively produces electric vehicles. We focus on the production and sale of commercial electric vehicles that
primarily address the needs of medium-duty commercial fleet operators with depot-based operations and predictable daily service routes of up to 120 miles.
We
currently design, produce and sell two vehicle platforms, the Smith Newton and the Smith Edison, both of which can be configured for multiple applications. We sell the Smith Newton in
the United States, the United Kingdom and in selected international markets. We currently sell the Smith Edison in the United Kingdom and in selected international markets. We are developing and plan
to introduce in early 2012 a Newton model that is configured as a step van, and intend to introduce in mid-2012 a Newton that will have a GVW of approximately 33,000 pounds to meet the
needs of delivery and transit customers. We intend to continue to develop and introduce a next generation Smith Edison in mid-2012. Our planned future vehicle offerings will be based on our Newton and
Edison vehicle platforms and will utilize our Smith Drive, Smith Power and Smith Link technologies.
Smith
UK launched the Smith Newton in December 2006 and began U.K. production of the Newton in January 2007. Smith UK also launched and began U.K. production of the Smith Edison in 2007.
Smith Electric Vehicles Corp., or Smith US, was incorporated in Delaware on January 13, 2009. We obtained our U.S. production facility in March 2009, began production in July 2009 and sold our
first Newton in the United States in December 2009.
From
August 5, 2009 through December 31, 2010, Smith US held a license from Tanfield under which we had the exclusive right in North America to use the Smith brand and
Tanfield's zero-emission vehicle know-how and technology to develop, test, manufacture, market, distribute, sell and service electric vehicles. We acquired Smith UK effective
January 1, 2011 and now own the Smith brand and the intellectual property rights we previously had licensed from Tanfield.
Our
corporate headquarters are located in Kansas City, Missouri and we have production, research and development, sales and service facilities in Kansas City, Missouri and outside of
Newcastle, England. Our two production facilities provide us with an aggregate of approximately 165,100 square feet of production space. Long term, we intend to expand our vehicle assembly operations
through a network of sales, service and assembly facilities, rather than significantly increasing the production capabilities of our existing facilities. We plan to open our sales, service and
assembly facilities in targeted urban areas in the United States and abroad, beginning with facilities on the east and west coasts of the United States. We expect to open the first of these facilities
in New York City in the first half of 2012. Once a sales, service and assembly facility is open in a geographic market, vehicle assembly for sales made in that geographic market generally would be
performed at that facility.
We
recently completed the transition of the powertrain and battery system used in the U.S.-produced Smith Newton to our Smith Drive and Smith Power technologies. In order to facilitate
this
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transition,
we temporarily suspended U.S. production of the Newton in August 2011 and re-tooled our Kansas City production facility. We began limited production of our second generation
Newton, which includes our Smith Drive, Smith Power and Smith Link technologies, in November 2011 and are in the process of ramping production and integrating new vendors into our supply chain.
As
a result of the transition to our next generation technologies and the accompanying suspension of U.S. production, we sold 21 vehicles in the U.S. during the third quarter of 2011,
compared with sales of 84 vehicles and 91 vehicles during the first and second quarters of 2011, respectively. Although the decline in sales resulted in a concurrent decline in material costs, our
other operating and administrative costs were stable or increasing. For example, to maintain our investment in training of our assembled workforce, we determined not to make reductions in our assembly
workforce during this period. We also continued to expand our research and development function to support future technology enhancements and build out our administrative workforce to position the
company for future growth. To manage cash, we worked with vendors to extend our payment terms and, as a result, our consolidated accounts payable increased between June 30, 2011 and
October 31, 2011. As a result of these activities, our consolidated cash position declined substantially from the $7.2 million of cash at June 30, 2011. To increase liquidity, we
issued $30.0 million of 2011 convertible notes and warrants in October 2011 to increase our cash position. All of the 2011 convertible notes converted into Series C preferred stock in
November 2011. See "—Liquidity and Capital Resources—Cash flows—Cash flows provided by financing activities" for additional information about our 2011 convertible
notes financing and our Series C preferred stock issuance.
Smith
US was a development stage enterprise from January 13, 2009, the date of Smith US's inception, through September 30, 2009. During this period, we devoted all of our
efforts to securing and establishing a new business, and our planned principal operations had not commenced. Smith US was no longer a development stage enterprise and first recognized revenues during
the fourth quarter of 2009.
We
operate on a fiscal year that ends on December 31. As of and for the periods prior to December 31, 2010, the financial statements of Smith UK and Smith US are presented
on a combined basis. As of and for periods subsequent to January 1, 2011, the financial statements for Smith Europe and Smith US are presented on a consolidated basis. See Note 1,
"Nature of Business and Presentation" to the combined and consolidated financial statements included elsewhere in this prospectus. Our combined results of operations, financial position and cash flows
may not be indicative of our future performance and do not necessarily reflect what our combined consolidated results of operations, financial position and cash flows would have been had we operated
as a separate, standalone entity without the shared resources of Tanfield during the periods presented.
We
operate our business in two reportable segments: (i) Zero Emission Vehicles and (ii) Maintenance Services. See "—Results of Operations" and Note 16,
"Information about Segments and Geographic Areas" to the combined and consolidated financial statements included elsewhere in this prospectus for information about our segments.
CONDITIONS IMPACTING OUR BUSINESS
We believe that the commercial electric vehicle industry is poised for growth due to governmental and popular support for companies
that purchase environmentally friendly vehicles, the current emphasis on reducing carbon emissions, the volatility of diesel fuel prices and the policy shift toward energy independence from fossil
fuels in the United States and Western Europe. Although these macro-level conditions are favorable and should drive adoption of commercial electric vehicles generally, and our vehicles specifically,
there are significant near-term challenges we are working to overcome related to introducing new technology products. We believe that the most significant of these challenges is the
limited and under-developed supply chain for many of the key components used in
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commercial
electric vehicles, including motors, control electronics units and batteries. The current absence of a well-developed supply chain has led to reliability and quality issues and
high vehicle system and component costs, which results in high initial vehicle costs when compared to diesel powered trucks of comparable GVWs, all of which impact customer satisfaction and limit the
broader adoption of commercial electric vehicles. To meet these challenges, we recently transitioned our U.S.-produced vehicles, and in 2012 expect to transition our U.K.-produced vehicles, to our
Smith Drive and Smith Power technologies, which will allow us to control and expand our supply chain with a goal of enhancing vendor diversity, reliability and quality. In turn, this will enable us to
substantially reduce the cost of key components, and thereby reduce both our initial vehicle prices and our vehicle cost of revenue. Furthermore, we expect that our tighter control over product
quality will result in decreased service and repairs cost of revenue, as we will incur lower warranty and non-warranty service costs. Combined, these factors should result in enhanced
customer satisfaction, deeper and broader customer relationships and increased vehicle sales.
KEY OPERATING METRICS
Our management uses order backlog, production slots filled and inventory turns as key operating metrics in evaluating our business.
As
of October 31, 2011 we have an order backlog of 120 vehicles. We include in our order backlog vehicles yet to be produced that are subject to binding purchase agreements or
written purchase orders we have received. Our order backlog excludes vehicles in inventory awaiting additional modifications or delivery to the end customer. Although the backlog of unfilled orders is
one of many indicators of market demand, other factors such as changes in production rates, internal and supplier available capacity, new vehicle introductions and competitive pricing actions may
affect point-in-time comparisons.
We
generally manage our production schedule on a rolling six-month forward basis and allocate production slots based on our receipt of binding purchase agreements and
purchase orders as well as customers' ordering forecasts. Based on this planning, we have allocated nearly all of our estimated 540 production slots through July 2012, of which approximately 80%
reflects U.S. production. Our allocation of production slots based on customers' ordering forecasts does not represent a guarantee that those customers will place orders, that customers will not alter
their forecasted delivery dates when placing orders or that orders made will not be cancelled. Nevertheless, we believe that closely monitoring our projected production schedule allows us to better
manage our business, including our inventory levels. We expect that our number of available production slots will increase as we transition our supply chain, which will allow us to ramp our production
and increase our production capacity.
Our
inventory turnover days for the six months ended June 30, 2011 was approximately 101 days. We calculate inventory turnover as consolidated total revenue for the period
divided by average consolidated inventory for the period. We use consolidated total revenue as the numerator as we believe this is a more stable indicator than cost of revenue, which may include
period adjustments such as lower of cost or market charges and warranty expense. Average consolidated inventory for the period is calculated as the sum of beginning of period and end of period
inventories divided by two. Management believes that inventory turnover is a useful operating metric because it provides insight into our ability to effectively manage our supply chain, purchasing and
production planning.
BASIS OF PRESENTATION
Revenue
Revenue consists of vehicle revenue and service and repairs revenue.
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Vehicle revenue
We recognize vehicle revenue primarily from the sale of our Newton and Edison vehicles. For the six months ended June 30, 2011,
vehicle revenue represented approximately 85% of total revenue, compared with 67%, 36% and 44% for 2010, 2009 and 2008, respectively. We anticipate that vehicle revenue as a percentage of total
revenue will continue to increase over the foreseeable future. For the year ended December 31, 2010 and for the six months ended June 30, 2011, four and two of our customers,
respectively, collectively accounted for approximately 40% and 62%, respectively, of our total revenue; 60% and 73%, respectively, of our vehicle revenue. Frito-Lay accounted for 66% of
our vehicle revenue for the six months ended June 30, 2011. Staples, Inc., Frito-Lay and Sainsbury's accounted for 24%, 14% and 12%, respectively, of our vehicle revenue for
the year ended December 30, 2010. Our vehicle sales strategy is focused on industry-leading companies and government entities that operate substantial, well-recognized,
medium-duty commercial vehicle fleets and that have the corporate or public commitment and resources to support and sustain the development of the commercial electric vehicle industry. As
such, and given the relationships we have established with our existing customers, we anticipate that a significant portion of our vehicle revenue will continue to come from a concentrated group of
customers for the foreseeable future.
Smith
UK previously sold and leased and Smith Europe also sells and leases forklifts to customers. During the six months ended June 30, 2011 and the years ended
December 31, 2010, 2009 and 2008, we recognized revenue related to the sale and lease of forklifts of approximately $0.8 million, $1.9 million, $2.7 million, and
$3.3 million, respectively. See Note 2, "Summary of Significant Accounting Policies" to the combined and consolidated financial statements included elsewhere in this prospectus for a
description of our accounting policy related to these transactions. We anticipate that revenue related to the sale and lease of forklifts will continue to be stable or declining over the foreseeable
future.
Service and repairs revenue
Service and repairs revenue is derived from the provision of fleet maintenance and repair services. These services, which are primarily
provided in the United Kingdom, include services for traditional diesel-fueled vehicles as well as for electric vehicles. For the six months ended June 30, 2011, service and repairs revenue
represented approximately 15% of total revenue, compared with 33%, 64% and 56% for 2010, 2009 and 2008, respectively. Although we anticipate that
we will grow our electric vehicle maintenance and repair services, we also anticipate that this growth will be slower than the growth in our vehicle sales and, accordingly, service and repairs revenue
will continue to decline as a percent of total revenue over the foreseeable future.
Cost of revenue
Cost of revenue consists of vehicle cost of revenue and service and repairs cost of revenue.
Vehicle cost of revenue
Vehicle cost of revenue includes direct material costs, labor costs, and manufacturing overhead. Vehicle cost of revenue also includes
estimated warranty expense and charges to write down the carrying value of our inventory when it exceeds its estimated net realizable value and to provide for obsolete and on-hand
inventory in excess of forecasted demand. We anticipate that our vehicle cost of revenue will increase as our vehicles sales increase and as we open our sales, service and assembly facilities.
However, we expect vehicle cost of revenue to decrease as a percentage of vehicle revenue as we complete our current cost down initiative and transition to our Smith Drive and Smith Power
technologies, which will result in increased component-, and decreased systems-, based purchasing.
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Service and repairs cost of revenue
Service and repairs cost of revenue includes replacement part costs, direct labor costs, and overhead that supports our service
activities. Service and repairs cost of revenue also includes charges to provide for obsolete and on-hand inventory in excess of forecasted use, and recognized depreciation expense related
to our forklift business. We anticipate that our service and repairs cost of revenue will increase as we expand our electric vehicle maintenance and repair services and open our sales, service and
assembly facilities.
Research and development expense
Research and development expense consists primarily of costs for personnel, third-party contractors, materials and supplies related to
the development of new products and the enhancement of existing products. As of September 30, 2011 we had 36 full-time employees engaged in research, development, design and
engineering. We expense all of our research and development costs as they are incurred. In the near term, we expect research and development expenses to increase in large part due to increased
personnel-related expenses, as we seek to hire additional employees, as well as contract-related expenses as we continue to invest in the development of our products. Reimbursements received from
government agencies for research and development expenditures are recorded separately as a component of other expense (income). We anticipate that our research and development expenses will continue
to increase in absolute dollars, primarily as a result of the continued development of our Smith Drive, Smith Power and Smith Link technologies, but, over time, will decrease as a percentage of
revenue.
Selling, general and administrative expense
Selling, general and administrative expenses consist primarily of personnel and facility costs related to our marketing, sales,
executive, finance, human resources, information technology and legal organizations, as well as litigation settlements and fees for professional and contract services. As of September 30, 2011,
we had 37 full-time employees engaged in these functions. We expect general and administrative expenses to increase as we incur additional costs related to operating as a publicly-traded
company, including increased audit and legal fees, costs of compliance with securities, corporate governance and other regulations, investor relations expenses and higher insurance premiums,
particularly those related to director and officer insurance. We also expect to incur increased costs as we hire personnel and enhance our infrastructure to support the anticipated growth of our
business, including in connection with the opening of our sales, service and assembly facilities.
Interest expense
Interest expense consists primarily of payable-in-kind interest related to convertible debt, the amortization
of deferred financing fees, and the amortization of debt discount recognized on issue of convertible debt.
Government grant reimbursements
We receive reimbursements from government agencies for certain qualified research and development expenditures, primarily under the
DOE's EV Demonstration Project and the United Kingdom's national innovation agency programs sponsored by the U.K. Department for Business, Innovation and Skills. As these projects are limited in scope
and duration, we have determined the best presentation to assist users of our financial statements in understanding our financial results is to recognize these reimbursements as a component of other
expense (income) rather than as a reduction in research and development expense.
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Other expense, net
Other expense, net consists primarily of fair value adjustments to financial instruments we have issued. Our Series A debentures
and 12% senior unsecured convertible promissory bridge notes, which we refer to as our bridge notes, include identifiable and separable derivative financial instruments. These separable financial
instruments, consisting primarily of a conversion option, an acceleration option and warrants, are adjusted at each quarter- and year-end to fair value. The adjustment to record the change
in each instrument's fair value may result in a either a charge to expense or a credit to income.
Income tax provision
We are subject to taxes in the United States and the United Kingdom. In the United States, we have incurred net losses since inception
and in the United Kingdom we have a history of operating losses. As a result, we do not currently pay tax in the jurisdictions in which we operate. Based on the available information, we concluded it
is more likely than not that our deferred tax assets will not be realized and, accordingly, we have recorded a full valuation allowance against all of our deferred tax assets.
Impact of foreign currency translation on reported results
The functional currency for Smith UK was and for Smith Europe is the British pound. Therefore, the results of Smith UK and Smith
Europe's operations are initially recorded in the British pound and, at the end of each period, are translated into U.S. dollars. The combined and consolidated operating results for all periods
presented are presented in U.S. dollars, which include the fluctuation of currency translation between the U.S. dollar and the British pound.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our results of operations and financial condition, as reflected in our combined and consolidated financial statements, have been
prepared in accordance with accounting principles generally accepted in the United States. As discussed in Note 2, "Summary of Significant Accounting Policies" to our combined and consolidated
financial statements included elsewhere in this prospectus, the preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting periods. On an ongoing basis, our management evaluates its estimates and judgments. We consider our accounting policies related to revenue
recognition, allowance for doubtful accounts, inventory valuation, warranty and fair value of financial instruments to be our critical accounting policies. Our management bases its estimates and
judgments on relevant facts and 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. Our most critical accounting policies are described below.
Revenue recognition
We recognize revenue from the sale of products and provision of services in accordance with SEC Staff Accounting Bulletin
No. 104,
Revenue Recognition
. Accordingly, we recognize revenue when: (i) persuasive evidence of an arrangement exists;
(ii) delivery has occurred or services have been rendered and there are no uncertainties regarding customer acceptance; (iii) our price is fixed or determinable; and
(iv) collection is reasonably assured. In instances where customer acceptance is required, revenue is either recognized (a) upon shipment when we are able to demonstrate that the
customer specific objective criteria have been met or (b) upon the earlier of customer acceptance or
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expiration
of the acceptance period. Payments received in advance of work performed are recorded as deferred revenue.
The
majority of our vehicle sales are made pursuant to purchase orders, although we do enter into purchase agreements from time to time. We also enter into both short- and
long-term vehicle maintenance agreements. We examine sales contracts to determine if the contract contains a multiple element arrangement, to determine whether the contract contains
multiple elements and, if so, to determine if separate units of accounting exist within the arrangement. As of June 30, 2011 and December 31, 2010, we have determined that all sales
arrangements should be accounted for as a single unit of accounting.
Smith
UK entered and Smith Europe enters into contracts with customers for the use of forklifts that we have determined to be lease transactions. At inception of these contracts, the
customer pays Smith UK or Smith Europe the full value of the forklift. At the end of a specified period, generally five years, the customer is contractually obligated to return the forklift to us and
we must pay the customer a residual value that was determined at the inception of the contract. The up-front payment received by Smith UK or Smith Europe from the customer is initially
recorded as deferred revenue and subsequently recognized as vehicle revenue on a straight-line basis, net of expected guaranteed repurchase payments, over the life of the contract.
Deferred revenue expected to be recognized as revenue more than one year subsequent to the balance sheet date is classified as long-term deferred revenue. We recognize the forklifts as a
component of property, plant and equipment throughout the contract term and depreciate the forklifts on a straight-line basis, net of salvage value, over the life of the contract. The
recognized depreciation expense is included as a component of cost of revenue in our combined and consolidated statements of operations.
Inventory valuation
We value our inventories at the lower of cost or market. Cost is computed using standard cost adjusted for purchase price variances,
which approximates actual cost on a first-in, first-out basis.
At
each quarter- and year-end, we review inventory to determine whether its carrying value exceeds the net amount realizable upon the ultimate sale of the inventory. This
requires us to determine the estimated selling price of our vehicles less the estimated cost to convert inventory on hand into a finished product. Our inventory valuation is based on our current
technology and estimates of demand, selling prices and production costs. Unforeseen changes in technology or our estimates of future selling prices or production costs may result in material
additional charges. We recorded permanent lower of cost or market adjustments of $3.7 million, $4.6 million, and $4.4 million during for the six months ended June 30, 2011
and for the years ended December 31, 2010 and 2009, respectively.
At
the end of each period, we also review inventory for excess or obsolete items. When inventory on hand for a specific item is determined to be in excess of our demand forecast or no
longer used in current production, we permanently reduce the inventory value for those excess or obsolete items to the estimated recoverable amount.
Warranty
We estimate and accrue our warranty and additional service action costs for each vehicle at the time of sale. Because we currently have
only two vehicle platforms and little claims experience, estimates are principally based on assumptions regarding the warranty costs. In addition, the number and magnitude of additional service
actions expected to be approved, and actual additional service actions, are taken into consideration in our assumptions. Significant vehicle components, such as batteries, cab, chassis and motors are
covered under warranty by our suppliers. These vendor warranties generally extend from one to five years from the date of our purchase of the component. If a component fails within the warranty
period, we have the right to return the component part to the
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vendor
and the vendor will either repair and return the component part, supply us with a new component part at no charge, or authorize us to offset the value against our open payable to the vendor.
The vendor warranty generally does not cover labor, travel or other costs we may incur when we provide the service action for our customer. We recognize warranty claim recoveries as an
adjustment to our warranty reserve when collection is reasonably assured. Future experience may result in changes in our assumptions, which could materially affect net income. Warranty reserves
amounted to $7.9 million, $6.7 million and $5.3 million as of June 30, 2011 and December 31, 2010 and 2009, respectively. Adjustments to warranty reserves are
recorded as a component of vehicle cost of revenue.
Fair value of financial instruments
We have issued financial instruments that either contain embedded conversion or acceleration options or include detachable warrants. At
the date we issue a financial instrument, we measure and recognize as an asset or liability the fair value of that financial instrument. Changes in the fair value of these financial instruments in
subsequent periods are recognized as a component of our net loss and the carrying value of the asset or liability is adjusted accordingly. Fair value is defined as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on
the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Under applicable accounting guidance, a
fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, that may be used to measure fair value:
Level 1—Quoted
prices in active markets for identical assets or liabilities.
Level 2—Inputs
other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable
inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
We
have financial instruments, consisting of a Series A conversion option liability, a bridge note acceleration option asset, and a bridge note detachable warrant, that are valued
based on Level 3 unobservable inputs that are supported by little or no market activity. As further described in Note 3, "Fair Value of Financial Instruments" to our combined and
consolidated financial statements included elsewhere in this prospectus, our measurement of fair value requires significant management assumptions and estimates. The recognized loss for change in fair
value for these instruments, in the aggregate, was $1.7 million both for the six months ended June 30, 2011 and the year ended December 31, 2010, and is included as a component of
other expense, net.
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RESULTS OF OPERATIONS
Six months ended June 30, 2011 compared to six months ended June 30, 2010
An analysis of changes in key items included in the statements of operations for the six months ended June 30, 2011 compared to
the six months ended June 30, 2010 follows. Amounts have been rounded. Percent of revenues, dollar change and percent change are all calculated based on amounts presented in this table (dollar
amounts in millions):
Six Months ended
June 30, 2011
Six Months ended
June 30, 2010
Amount
% of
Revenues
Amount
% of
Revenues
$ Change
% Change
Revenue
Vehicle
$
31.9
84.8
%
$
9.6
60.8
%
$
22.3
232
%
Service and repairs
5.7
15.2
6.2
39.2
(0.5
)
(8
)
Total revenue
37.6
100.0
15.8
100.0
21.8
138
Significant Expenses
Cost of revenue—vehicle
40.0
106.4
12.3
77.8
27.7
225
Cost of revenue—service and repairs
6.0
16.0
6.2
39.2
(0.2
)
(3
)
Total cost of revenue
46.0
122.3
18.5
117.1
27.5
149
Research and development
1.5
4.0
0.8
5.1
0.7
88
Selling, general and administrative
7.0
18.6
4.4
27.8
2.6
59
Interest expense
1.9
5.1
1.2
7.6
0.7
58
Government grant reimbursements
(0.2
)
(0.5
)
(0.3
)
(1.9
)
0.1
33
Loss on extinguishment of debt
1.0
2.7
—
—
1.0
n/m
Other expense, net
1.8
4.8
0.7
4.4
1.1
157
Provision (benefit) for income taxes
—
—
—
—
—
—
Key Measurements
Gross loss
(8.4
)
(22.3
)
(2.7
)
(17.1
)
(5.7
)
(211
)
Operating loss
(16.9
)
(44.9
)
(7.9
)
(50.0
)
(9.0
)
(114
)
Net loss
(21.3
)
(56.6
)
(9.5
)
(60.1
)
(11.8
)
(124
)
Impact of foreign currency translation on reported results
Based on the average exchange rate for each year, the British pound was stable versus the U.S. dollar during the six months ended
June 30, 2011 compared with the same period of the prior year and, as a result, had a negligible impact on our operating results discussed below.
Discussion of operating results
Revenue:
Revenue increased $21.8 million, or 138%, to $37.6 million during the six months ended June 30, 2011 from
$15.8 million during the same period of the prior year.
Vehicle
revenue increased $22.3 million, or 232%, to $31.9 million for the six months ended June 30, 2011 from $9.6 million for the six months ended
June 30, 2010. Our U.S. sales increased $21.5 million, to $25.4 million for the six months ended June 30, 2011 compared to $3.9 million during the comparable period
of 2010. Although we had commenced U.S. operations by the beginning of 2010, our focus during the six months ended June 30, 2010 was on developing our own processes and supply chain and on
developing customer leads. As a result, we had relatively few sales during this period.
Service
and repairs revenue decreased $0.5 million, or 8%, to $5.7 million for the six months ended June 30, 2011 from $6.2 million for the same period of the
prior year. The decrease in service and repairs revenue is primarily the result of the ongoing economic downturn. In response to the continued downturn, some fleet managers have continued the trend of
bringing service in-house to better control costs. As a result of this trend, our service and repairs revenue mix has continued to shift from fixed service contracts that primarily cover
scheduled maintenance activities, which have more
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predictable
volume but lower margins, towards cost plus work not under a service contract that has less predictable volume but higher margins.
Cost of revenue:
Cost of revenue increased $27.5 million, or 149%, to $46.0 million during the six months ended June 30,
2011
from $18.5 million for the same period of the prior year.
Vehicle
cost of revenue increased $27.7 million, or 225%, to $40.0 million for the six months ended June 30, 2011 from $12.3 million for the same period of
the prior year. This increase is primarily the result of a $26.4 million increase in U.S. vehicle cost of revenue to support the increase in U.S. vehicle revenue.
Service
and repairs cost of revenue decreased $0.2 million, or 3%, to $6.0 million for the six months ended June 30, 2011 from $6.2 million for the same
period of the prior year. The decrease in service and repair cost of revenue is primarily the result of the $0.5 million decrease in service and repairs revenue, partially offset by continuing
fixed costs.
Gross loss:
Gross loss increased $5.7 million, to $8.4 million for the six months ended June 30, 2011 from
$2.7 million
for the same period of the prior year. Gross loss as a percentage of revenue was 22.3% for the six months ended June 30, 2011 compared to 17.1% for the six months ended June 30, 2010.
This increase in gross loss is primarily attributable to a $4.9 million increase in the U.S. gross loss as we increased sales, which currently have a negative gross margin.
Research and development expense:
Research and development expense increased $0.7 million, or approximately 88%, to
$1.5 million for
the six months ended June 30, 2011 from $0.8 million for the same period of the prior year. The increase in research and development expense is primarily related to our efforts to
develop our second generation technology related to battery management (Smith Power), drive train components (Smith Drive), and chargers.
Selling, general and administrative expense:
Selling, general and administrative expense increased $2.6 million, or approximately
59%, to
$7.0 million for the six months ended June 30, 2011 from $4.4 million for the same period of the prior year. The increase in selling, general and administrative expense was
primarily the result of a $2.2 million increase in compensation expense combined with a $0.7 million increase in legal and professional fees. The increase in compensation expense is
primarily related to an increase in staffing required to support our growth in the U.S. combined with a $0.6 million increase in share-based and incentive compensation. The increase in legal
and professional fees is primarily related to defending litigation. See Note 13, "Commitments and Contingencies" to the combined and consolidated financial statements included elsewhere in this
prospectus.
Interest expense:
Interest expense for the six months ended June 30, 2011 was $1.9 million, an increase of $0.7 million,
or
approximately 58%, from $1.2 million of interest expense for the same period of the prior year. From March 2009 through December 2009, we placed approximately $10.4 million of
Series A debentures and in January 2010 we placed approximately $0.7 million of Series A debentures. As of June 30, 2011, all $11.1 million of Series A
debentures were outstanding. From March 2010 through October 2010 we placed, in increments, approximately $14.2 million of bridge notes. These placements are discussed in additional detail
under "—Liquidity and Capital Resources" below. The $0.7 million increase in interest expense results from an increase in our average outstanding debt balance combined with
increased accretion and amortization of debt discount and deferred financing fees, respectively.
Government grant reimbursements:
Government grant reimbursements for the first six months of 2011 was $0.2 million compared to
$0.3 million for the first six months of 2010. The $0.2 million of government grant reimbursements received during the six months ended June 30, 2011 are primarily comprised of
balances received under the United Kingdom's national innovation agency programs sponsored by the U.K. Department for Business, Innovation and Skills. The $0.3 million during the six
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months
ended June 30, 2010 is primarily comprised of qualified expenses that we incurred, submitted and were reimbursed for under the DOE EV Demonstration Project.
Loss on extinguishment of debt:
Loss on extinguishment of debt was $1.0 million for the six months ended June 30, 2011 as the
result of
conversion of the outstanding convertible promissory bridge notes to convertible redeemable preferred stock. During the six months ended June 30, 2010, there was no loss on extinguishment of
debt.
Other expense, net:
Other expense, net for the six months ended June 30, 2011 was $1.8 million, an increase of
$1.1 million from
$0.7 million for the same period of the prior year. The increase in other expense, net is primarily the result of a $0.9 million increase in net expense recognized related to the change
in the fair value of discrete derivatives related to our convertible debt.
Income tax benefit:
We incurred operating losses in both of the primary jurisdictions in which we have operations. As we have a history
of operating
losses in both jurisdictions, we have fully reserved our net operating loss deferred tax assets. As a result, we did not record any income tax benefit during the six months ended June 30, 2011
and 2010.
Net loss:
Net loss for the six months ended June 30, 2011 was $21.3 million, an increase of $11.8 million from the
$9.5 million net loss for the same period of the prior year. The increase in net loss was primarily a result of our geographic expansion into the U.S., which resulted in increased sales with a
negative gross margin and an increase in infrastructure and financing expense to support these operations.
Segment results
We have two reportable segments: Zero Emission Vehicles and Maintenance Services. See Note 16, "Information about Segments and
Geographic Areas" to the combined and consolidated financial statements included elsewhere in this prospectus for a description of how we calculate segment income (loss).
The
Zero Emission Vehicles segment represents the sale of vehicles we assemble. Intersegment revenues are primarily comprised of parts sold to the maintenance services segment. Zero
Emission Vehicles segment revenue, including both external customers and intersegment revenue, increased by approximately $22.3 million to $31.6 million, for the six months ended
June 30, 2011 from $9.3 million for the six months ended June 30, 2010. Zero Emission Vehicles segment loss, which excludes corporate expenses and certain other unallocated costs,
increased approximately $7.7 million, to $12.6 million, for the six months ended June 30, 2011 from $4.9 million for the six months ended June 30, 2010. Zero
Emission Vehicles segment revenue increased during the first six months of 2011 compared to the comparable period of 2010 primarily because, although we had commenced U.S. operations by the beginning
of 2010, our focus during the six months ended June 30, 2010 was on developing our own processes and supply chain and on developing customer leads. As a result, our U.S. sales increased by
$21.5 million, to $25.4 million, for the six months ended June 30, 2011 from $3.9 million for the comparable period of 2010. The increase in Zero Emission Vehicles segment
loss is due primarily to our expansion in the United States, which resulted in an increase in segment gross loss as our cost of revenue exceeded our revenue, an increase in segment research and
development expense related to development of our Smith Power and Smith Drive technologies, and an increase in selling, general and administrative costs to support the ongoing geographical expansion
of our operations.
The
Maintenance Services segment represents our activities in connection with the servicing of diesel and electric engines for customers in the United Kingdom and the sale and lease of
forklifts. Intersegment revenues are primarily comprised of the provision of warranty-related repairs and service by the Maintenance Services segment on behalf of the Zero Emission Vehicles segment.
Maintenance Services segment revenue, including both external customers and intersegment revenue, decreased $1.0 million, to $8.0 million, for the six months ended June 30, 2011
from $9.0 million for the six
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months
ended June 30, 2010, and Maintenance Services segment loss, which excludes corporate expenses and certain other unallocated costs, increased by $0.4 million, to
$0.5 million, for the six months ended June 30, 2011 compared to $0.1 million for the six months ended June 30, 2010. The decrease in Maintenance Services revenue is
primarily the result of the continued downturn in the economy, which resulted in the continuation of the trend of fleet managers bringing service in-house to better control costs.
Maintenance Services segment income (loss) approximated breakeven for the six months ended June 30, 2011 and 2010.
Year ended December 31, 2010 compared to year ended December 31, 2009
An analysis of changes in key items included in the statements of operations for the year ended December 31, 2010 compared to
the year ended December 31, 2009 follows. Amounts have been rounded. Percent of revenues, dollar change and percent change are all calculated based on amounts presented in this table (dollar
amounts in millions):
Year ended
December 31, 2010
Year ended
December 31, 2009
Amount
% of
Revenues
Amount
% of
Revenues
$ Change
% Change
Revenue
Vehicle
$
23.8
66.9
%
$
8.2
36.0
%
$
15.6
190
%
Service and repairs
11.8
33.1
14.6
64.0
(2.8
)
(19
)
Total revenue
35.6
100.0
22.8
100.0
12.8
56
Significant Expenses
Cost of revenue—vehicle
33.1
93.0
13.4
58.8
19.7
147
Cost of revenue—service and repairs
12.2
34.3
14.4
63.2
(2.2
)
(15
)
Total cost of revenue
45.3
127.2
27.8
121.9
17.5
63
Research and development
2.6
7.3
1.1
4.8
1.5
136
Selling, general and administrative
13.3
37.4
10.7
46.9
2.6
24
Interest expense
3.7
10.4
0.7
3.1
3.0
429
Government grant reimbursements
(0.7
)
(2.0
)
—
—
(0.7
)
n/m
Other expense, net
1.7
4.8
0.1
0.4
1.6
n/m
Provision (benefit) for income taxes
—
—
—
—
—
—
Key Measurements
Gross loss
(9.7
)
(27.2
)
(4.9
)
(21.5
)
(4.8
)
(98
)
Operating loss
(25.6
)
(71.9
)
(16.8
)
(73.7
)
(8.8
)
(52
)
Net loss
(30.3
)
(85.1
)
(17.5
)
(76.8
)
(12.8
)
(73
)
Impact of foreign currency translation on reported results
Based on the average exchange rate for each year, the British pound was stable versus the U.S. dollar during 2010 compared with 2009
and, as a result, had a negligible impact on our operating results discussed below.
Discussion of operating results
Our vehicle revenues and vehicle cost of revenue for 2010 and 2009 were attributable to sales of the Smith Newton in the United States
and sales of the Smith Edison and Smith Newton, and sales and leases of forklifts, in the United Kingdom.
Revenue:
Revenue increased $12.8 million, or 56%, to $35.6 million for 2010 compared with $22.8 million for 2009. As
explained
below, the increase in revenue is primarily the result of an increase in vehicle sales partially offset by a decrease in service and repairs revenue.
Vehicle
revenue increased $15.6 million, or 190%, to $23.8 million for 2010 from $8.2 million for 2009. Vehicle revenue increased in 2010 compared to 2009 primarily
because we did not commence operations in the U.S. until the fourth quarter of 2009. As a result, our U.S. sales increased by
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$13.7 million,
from $0.2 million in 2009 to $13.9 million in 2010. The remainder of the increase is primarily due to a full year of sales of our lower GVW vehicle, the Smith
Edison. During 2008, we invested in research and development activities to improve the range of this vehicle. The improved-range vehicle was introduced in 2009 and had a full year of sales in 2010.
Service
and repairs revenue decreased $2.8 million, or 19%, to $11.8 million for 2010 from $14.6 million for 2009. The decrease in service and repairs revenue is
primarily the result of the downturn in the economy, which resulted in some fleet managers bringing service in-house to better control costs. As a result of this trend, our service and
repairs revenue mix has shifted from fixed service contracts that primarily cover scheduled maintenance activities, which have more predictable volume but lower margins, towards cost plus work not
under a service contract that has less predictable volume but higher margins.
Cost of revenue:
Cost of revenue increased $17.5 million, or 63%, to $45.3 million for 2010 from $27.8 million for 2009.
Vehicle
cost of revenue increased $19.7 million, or 147%, to $33.1 million for 2010 from $13.4 million for 2009. Vehicle cost of revenue increased in 2010 compared
to 2009 primarily because we did not commence operations in the U.S. until the fourth quarter of 2009. As a result of the full year of U.S. operations in 2010, our vehicle cost of revenue increased by
approximately $21.8 million. This increase was partially offset by a $4.1 million decrease in U.K.-related warranty expense. Warranty expense during 2009 was significantly higher during
2010 due to technology issues related to Newton vehicles sold in the United Kingdom. These technology issues were resolved by 2010.
Service
and repairs cost of revenue decreased $2.2 million, or 15%, to $12.2 million for 2010 from $14.4 million for 2009. The decrease in service and repairs cost
of revenue is primarily related to the $2.8 million decrease in service and repairs revenue, partially offset by continuing fixed costs.
Gross loss:
Gross loss increased $4.8 million, to $9.7 million, for 2010, from $4.9 million for 2009. Gross loss as a
percentage
of revenue was 27.2% for 2010 compared to 21.5% for 2009. Our gross loss increased approximately $8.1 million primarily as the result of additional expenses as Smith US transitioned from a
start-up company to an operating company. This increase was partially offset by the $4.1 million decrease in U.K.-related warranty expense discussed above. For 2010 and 2009, we had
a negative gross margin and, as a result, our gross loss increased as our revenues increased.
Research and development expense:
Research and development expense increased $1.5 million, or approximately 136%, to
$2.6 million for
2010, from $1.1 million for 2009. The increase in research and development expense is primarily related to our efforts during 2010 to develop our second generation technology related to battery
management (Smith Power), drive train components (Smith Drive), and chargers, as well as to develop our telemetry technology (Smith Link) to monitor, in real-time, key vehicle performance
measures.
Selling, general and administrative expense:
Selling, general and administrative expense increased $2.6 million, or approximately
24%, to
$13.3 million for 2010, from $10.7 million for 2009. The increase in selling, general and administrative expense was primarily the result of a $4.0 million charge for the
settlement of litigation and a $1.3 million increase in compensation expense as we increased our U.S.
administrative staff to support the initiation of U.S. operating activities. These increases were partly offset by decreases in share-based compensation expense of $1.6 million,
start-up costs of $0.5 million, and professional services of $0.4 million. The $1.6 million decrease in share-based compensation expense is primarily due to
approximately $1.5 million of expense recognized in 2009 upon the grant of common stock to our then current Chairman in December 2009 upon his appointment to that position. The
$0.5 million decrease in start-up costs represents costs incurred during our 2009 initiation stage that were not repeated during 2010. The $0.4 million decrease in
professional services expenses is due primarily to the decrease in legal and consulting expenses incurred during our inception period and the addition of staff to assume responsibilities previously
handled by consultants.
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Interest expense:
Interest expense for 2010 was $3.7 million, an increase of $3.0 million, or approximately 429%, from
$0.7 million of interest expense for 2009. From March 2009 through December 2009, we placed approximately $10.4 million of Series A debentures and in January 2010 we placed
approximately $0.7 million of Series A debentures. From March 2010 through October 2010 we placed, in increments, approximately $14.2 million of bridge notes. As of
December 31, 2010, all $11.1 million of Series A debentures and $14.2 million of bridge notes were outstanding. These placements are discussed in additional detail under
"—Liquidity and Capital Resources" below. The $3.0 million increase in interest expense is primarily the result of a $1.5 million increase in
payable-in-kind interest, due primarily to an increase in our average outstanding debt balance in 2010 compared with 2009, a $1.2 million increase resulting from
accretion of debt discount, and a $0.4 million increase resulting from amortization of deferred financing fees.
Government grant reimbursements:
Government grant reimbursements was $0.7 million for 2010 compared to less than $0.1 million
for 2009.
Government grant reimbursements for 2010 is primarily comprised of the $0.5 million reimbursement of qualified research and development expenditures under the DOE EV Demonstration Project
combined with approximately $0.2 million of reimbursements under the United Kingdom's national innovation agency programs. We had minimal expenses that qualified for reimbursement during 2009.
See Note 2, "Summary of Significant Accounting Policies—Government Grant Reimbursements" to the combined and consolidated financial statements included elsewhere in this prospectus
for additional information regarding the accounting for this grant income.
Other expense, net:
Other expense, net for 2010 was $1.7 million compared to $0.1 million for 2009. The increase in other
expense, net,
is primarily the result of an increase in the fair value of embedded
derivative related to our convertible debt. Other expense, net is primarily comprised of the change in the fair value of embedded derivatives related to our convertible debt.
Income tax benefit:
We incurred operating losses in both of the primary jurisdictions in which we have operations. As we have a history
of operating
losses in both jurisdictions, we have fully reserved our net operating loss deferred tax assets. As a result, we did not record any income tax benefit during either 2010 or 2009.
Net loss:
Net loss for 2010 was $30.3 million, an increase of $12.8 million from the $17.5 million net loss for 2009.
The
increase in net loss was primarily a result of the $4.8 million increase in our gross loss, the $4.0 million accrual to settle pending litigation, the $3.0 million increase in
interest expense, the $1.6 million increase in expense related to the change in fair value of derivative financial instruments, and the $1.5 million increase in research and development
expense, partially offset by the $1.4 million decrease in share-based compensation expense.
Segment results
Zero Emission Vehicles segment revenue, including both external customers and intersegment revenue, increased by approximately
$16.1 million, to $23.6 million for 2010 from $7.5 million for 2009. Zero Emission Vehicles segment loss increased $4.9 million, to $15.1 million, for 2010 from
$10.2 million for 2009. Zero Emission Vehicles segment revenue increased in 2010 compared to 2009 primarily because we did not commence operations in the U.S. until the fourth quarter of 2009.
As a result, our U.S. sales increased by $13.7 million, from $0.2 million in 2009 to $13.9 million in 2010. The remainder of the increase is primarily due to a full year of sales
of our lower GVW vehicle, the Smith Edison that was introduced in the United Kingdom during 2009. The increase in Zero Emission Vehicles segment loss is due primarily to our expansion into the United
States, which resulted in an approximate $8.1 million increase in segment gross loss as our cost of revenue exceeded our revenue, an approximate $1.3 million increase in segment research
and development expense related to development of our Smith Power and Smith Drive technologies, and an approximate $0.7 million increase in segment selling, general and administrative costs to
support the geographical expansion of our operations, and was partially offset by a $4.1 million decrease in U.K.-related warranty expense.
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Maintenance
Services segment revenue, including both external customers and intersegment revenue, decreased $4.4 million, to $16.6 million, for 2010 from
$21.0 million for 2009, and Maintenance Services segment income (loss) decreased $1.6 million, to a $(0.7) million loss, for 2010 compared to $0.9 million of income for 2009. The
decrease in maintenance services external revenues is primarily the result of the downturn in the economy, which resulted in some fleet managers bringing service in-house to better control
costs. Additionally, the sale and lease of forklifts decreased as we focused our efforts and resources on our zero emission vehicle segment. The $1.6 million decrease in maintenance services
segment income (loss) relates primarily to a decrease in fixed service contracts combined with the decrease in forklift sales and leases.
Year ended December 31, 2009 compared to year ended December 31, 2008
An analysis of changes in key items included in the statements of operations for the year ended December 31, 2009 compared to
December 31, 2008 follows. Amounts have been rounded. Percent of revenues, dollar change and percent change are all calculated based on amounts presented in this table (dollar amounts in
millions):
Year ended
December 31, 2009
Year ended
December 31, 2008
Amount
% of
Revenues
Amount
% of
Revenues
$ Change
% Change
Revenue
Vehicle
$
8.2
36.0
%
$
14.2
43.8
%
$
(6.0
)
(42
)%
Service and repairs
14.6
64.0
18.2
56.2
(3.6
)
(20
)
Total revenues
22.8
100.0
32.4
100.0
(9.6
)
(30
)
Significant Expenses
Cost of revenue—vehicle
13.4
58.8
21.7
67.0
(8.3
)
(38
)
Cost of revenue—service and repairs
14.4
63.2
18.1
55.9
(3.7
)
(20
)
Total cost of revenue
27.8
121.9
39.8
122.8
(12.0
)
(30
)
Research and development
1.1
4.8
9.5
29.3
(8.4
)
(88
)
Selling, general and administrative
10.7
46.9
5.4
16.7
5.3
98
Interest expense
0.7
3.1
—
—
0.7
n/m
Provision (benefit) for income taxes
—
—
—
—
—
—
Other expense, net
0.1
0.4
—
—
0.1
n/m
Key Measurements
Gross loss
(4.9
)
(21.5
)
(7.4
)
(22.8
)
2.5
34
Operating loss
(16.8
)
(73.7
)
(22.3
)
(68.8
)
5.5
25
Net loss
(17.5
)
(76.8
)
(22.3
)
(68.8
)
4.8
22
Impact of foreign currency translation on reported results
Based on the average exchange rate for each year, the British pound was weaker versus the U.S. dollar during the year ended
December 31, 2009 compared with the year ended December 31, 2008. The amount of the impact, when necessary for an understanding of our operating results, is included in the discussion
below.
Discussion of operating results
Our vehicle revenues and vehicle cost of revenue for 2009 and 2008 were primarily attributable to sales of the Smith Edison, the Smith
Newton and sale and lease of forklifts in the United Kingdom. Smith US did not commence operations until January 2009 and recognized the sale of only one vehicle during 2009.
Revenue:
Revenue decreased $9.6 million, or 30%, to $22.8 million for 2009 compared with $32.4 million for 2008.
Approximately
$4.2 million of this decrease was attributable to fluctuations in
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the
British pound versus the U.S. dollar. The remaining decrease of $5.4 million is primarily the result of weaker vehicle sales as explained below.
Vehicle
revenue, exclusive of the currency impact, decreased approximately $4.5 million, or approximately 32%, from 2008 to 2009. During 2008, we had significant orders from two
customers that replaced existing vehicles that were taken out of service with new electric vehicles. During 2009, the economic downturn resulted in vehicle operators, including the two customers that
had made significant purchases during 2008, to continuing to hold and maintain their existing fleets. In addition, forklift sales and leases decreased as we reduced our bulk purchases and subsequent
sale and lease of forklifts to focus on our Smith Newton and Smith Edison vehicles.
Service
and repairs revenue, exclusive of the currency impact, decreased approximately $0.9 million, or approximately 5%, from 2008 to 2009. This decrease is primarily the result
of the downturn in the economy, which resulted in a loss of service contracts as some fleet managers initiated the process of bringing service in-house to better control costs.
Cost of revenue:
Cost of revenue decreased $12.0 million, or 30%, to $27.8 million for 2009 compared with $39.8 million
for
2008. Approximately $4.8 million of this decrease was attributable to fluctuations in the British pound versus the U.S. dollar. The remaining decrease of $7.2 million is explained below.
Vehicle
cost of revenue, exclusive of the currency impact, decreased approximately $6.2 million, or approximately 29%, from 2009 to 2008. This decrease is primarily the result of
the decline in vehicle sales partly increased by an increase in our warranty expense. During 2009, we identified a problem with the batteries of Newton vehicles built in the United Kingdom. As a
result, we increased our warranty expense by approximately $3.2 million.
Service
and repairs cost of revenue, exclusive of the currency impact, decreased approximately $1.0 million, or approximately 6%, from 2009 to 2008. This decrease is primarily
related to the decrease in service and repairs revenue in 2009 compared to 2008.
Gross loss:
Gross loss decreased $2.5 million, or approximately 34%, to $4.9 million for 2009 compared with $7.4 million
for
2008. Gross loss as a percentage of revenues was 21.5% during 2009 compared with 22.8% during 2008. The decrease in gross loss primarily results from a decline in vehicle revenue as we were selling
vehicles at a negative margin, partially offset by an increase in warranty expense.
Research and development expense:
Research and development expense decreased $8.4 million, or approximately 88%, to
$1.1 million for
2009 compared with $9.5 million for 2008. Costs incurred during 2009 included general research and development and costs related to preparing the Smith Newton for sale in North America. Costs
incurred during 2008 were primarily related to the development of improved technology for our Edison vehicle in Europe, including improved drivelines, development of lithium-ion batteries, and
improved battery charging.
Selling, general and administrative expense:
Selling, general and administrative expense increased $5.3 million, or approximately
98%, to
$10.7 million for 2009 compared with $5.4 million for 2008. The increase is primarily the result of the January 2009 inception of Smith US. Smith US incurred $6.1 million of
selling, general and administrative during 2009. The combined selling, general and administrative costs of Smith US and Smith UK for 2009 included increases in share-based compensation of
$1.7 million, management fees of $1.2 million, professional services of $1.1 million, salaries and other compensation of $1.0 million, marketing expenses of
$0.8 million, and start-up costs of $0.5 million. The $1.7 million increase in share-based compensation expense is primarily comprised of approximately
$1.5 million of expense related to a grant of common stock to our then current Chairman in December 2009 upon his appointment to that position and $0.2 million representing services
contributed by our founding shareholders upon inception in exchange for shares of common stock. The $1.2 million increase in management fees represents an increase in various
pass-through and
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shared
corporate expenses charged by Tanfield to Smith UK. The increase in professional fees primarily relates to fees paid to consultants engaged and legal fees incurred during the inception period
and certain other general legal expenses. The $1.0 million increase in compensation costs relate primarily to the increase in our U.S. administrative staff to support the initiation of U.S.
operating activities. The $0.8 million increase in marketing expenses primarily relates to costs incurred to promote the Smith brand in the U.S. The $0.5 million of general
start-up costs include production and related facility and overhead costs incurred by Smith US during the 2009 inception period. The increase in Smith US selling, general and
administrative expense was partially offset by a $0.8 million decrease in selling, general and administrative expense due to the impact of foreign currency translation.
Interest expense:
Interest expense for 2009 was $0.7 million. We did not incur any interest expense during 2008. The 2009 interest
expense is
the result of Smith US's debt financing to support its start-up activities.
Income tax benefit:
We incurred operating losses in both of the primary jurisdictions in which we have operations. As we have a history
of operating
losses in both jurisdictions, we have fully reserved our net operating loss deferred tax assets. As a result, we did not record any income tax benefit during either 2009 or 2008.
Net loss:
Net loss for 2009 was $17.5 million, a decrease of $4.8 million from the 2008 net loss of $22.3 million.
Approximately
$1.6 million of this decrease was attributable to fluctuations in the British
pound versus the U.S. dollar. The remainder of the decrease in net loss is primarily the result of a decrease in research and development spending as a result of the completion of our 2008 project to
improve the technology for the Edison and a decrease in inventory adjustments, partially offset by an increase in selling, general and administrative expenses primarily due to the initiation of
operations in the United States.
Segment results
Zero Emission Vehicles segment revenue, including both external customers and intersegment revenue, decreased by $1.5 million,
to $7.5 million, for 2009 from $9.0 million for 2008. Zero Emission Vehicles segment loss decreased $10.2 million, to $10.2 million, for 2009 from $20.4 million for
2008. The decrease in segment revenue is primarily the result of an approximate $1.4 million currency impact due to the weakening of the British pound versus the U.S. dollar during 2009 as
compared with 2008. The decrease in segment external revenue, which was largely offset by an increase in intersegment revenue, was primarily the result of the economic downturn which resulted in
vehicle operators, including the two customers that had made significant purchases during 2008, continuing to hold and maintain their existing fleets. The $10.2 million decrease in Zero
Emission Vehicles segment loss is primarily the result of an $8.4 million decrease in research and development spending combined with an approximate $1.9 million currency impact due to
the weakening of the British pound versus the U.S. dollar during 2009 as compared with 2008. During 2008, we incurred significant research and development costs primarily related to the development of
improved technology for our Edison vehicle in Europe, including improved drivelines, development of lithium-ion batteries, and improved battery charging.
Maintenance
Services segment revenue, including both external customers and intersegment revenue, decreased $3.3 million, to $21.0 million for 2009 from
$24.3 million for 2008, and Maintenance Services segment income had a slight decrease of $0.1 million, to $0.9 million, for 2009 compared to $1.0 million for 2008. The
decrease in segment revenue is primarily the result of an approximate $3.9 million currency impact due to the weakening of the British pound versus the U.S. dollar during 2009 as compared with
2008. An increase in intersegment revenue was largely offset by a decline in external revenue, primarily attributable to a decrease in forklift sales and leases as we reduced our sale and lease of
forklifts to focus on our Smith Newton and Smith Edison vehicles. The $0.1 million decrease in the Maintenance Services segment income relates primarily to the foreign currency impact of the
weakening of the British pound versus the U.S. dollar during 2009 as compared with 2008.
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LIQUIDITY AND CAPITAL RESOURCES
Sources of liquidity
Our primary source of cash from January 1, 2009 through June 30, 2011 has been the proceeds from the sale of our
Series A debentures, our bridge notes and our Series B preferred stock. During this period, our financing activities have provided us with aggregate net proceeds of approximately
$61.8 million. For 2008, 2009 and 2010, the primary source of cash for Smith UK was cash made available by Tanfield. Cash flows related to the Series A debentures, our bridge notes and
our Series B preferred stock are discussed below in "—Cash flows—Cash flow provided by financing activities."
As
of June 30, 2011, we had $7.2 million in cash and cash equivalents. On September 14, 2011, we issued the senior note for cash proceeds of $2.8 million.
Between October 7, 2011 and October 31, 2011, we issued and sold the 2011 convertible notes and 2011 warrants for aggregate proceeds of $30.0 million, consisting of cash proceeds
of $25.2 million, cancellation of the $2.8 million of indebtedness under the senior note and the conversion of approximately $2.0 million of the outstanding balance of the
purchase price we owe to Tanfield in connection with the acquisition of our Smith UK business.
During
the six months ended June 30, 2011 and during each of the three years ended December 31, 2010, our operating activities used significant cash. We expect that our
cash and cash equivalents, together with the proceeds of the issuance of the senior note and our 2011 convertible notes and our anticipated cash from operating activities, will be sufficient to fund
our operating activities, including our planned capital expenditures and research and development activities, through the first quarter of 2012. As such, we plan to pursue additional funding through
one or more private placements of our equity or debt securities. We cannot be certain that additional funds will be available to us on favorable terms or at all.
Cash flows
Summary of cash flows (in thousands)
Years ended December 31,
Six Months ended
June 30,
2010
2009
2008
2011
2010
Net cash used in operating activities
$
(12,274
)
$
(12,573
)
$
(26,406
)
$
(22,473
)
$
(5,820
)
Net cash used in investing activities
(1,662
)
(804
)
(524
)
(1,707
)
(812
)
Net cash provided by financing activities
13,679
14,254
27,239
30,349
5,687
Cash flows used in operating activities
Our net cash used in operating activities totaled $22.5 million for the six months ended June 30, 2011. Our net cash used
in operating activities for the six months ended June 30, 2011 was comprised primarily of our net loss of $21.3 million combined with $13.2 million of cash used by changes in
operating assets and liabilities, partially offset by $12.0 million of non-cash charges and credits.
The
non-cash charges and credits primarily consist of the provision for inventory impairment of $3.7 million, primarily as the result of our lower of cost or market
adjustment, a $2.7 million warranty charge, primarily related to our increased vehicle revenue, a $1.7 million charge related to the change in fair value of financial instruments, the
$1.0 million loss on debt extinguishment, a $0.9 million increase in accrued paid-in-kind interest, and $0.7 million depreciation and amortization. See
Note 9, "Convertible Debt and Convertible Redeemable Preferred Stock" to the combined and consolidated financial statements included elsewhere in this prospectus for additional information
regarding the calculation of the fair value of the financial instruments and the accretion of the discount on convertible debt.
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The
most significant changes in operating assets and liabilities were the $4.2 million use of cash related to an increase in receivables and the $6.7 million use of cash
related to the decrease in deferred revenue. Receivables will fluctuate from period to period based on the timing of sales. Deferred revenue decreased as we recognized revenue related to the vehicles
for which we received cash prior to December 31, 2010 but completed and transferred title subsequent to December 31, 2010.
Our
net cash used in operating activities totaled $12.3 million for the year ended December 31, 2010. Our net cash used in operating activities for 2010 was comprised
primarily of our net loss of $30.3 million, partially offset by approximately $13.6 million of non-cash charges and credits and $4.4 million of cash generated by
changes in operating assets and liabilities. The non-cash charges and credits primarily consist of the provision for inventory impairment of $4.6 million, primarily as the result of
our lower of cost or market adjustment, the provision for warranty reserve of $2.1 million, accrued paid-in-kind interest on our Series A debentures and bridge
notes of $1.9 million, the change in the fair value of financial instruments of $1.7 million, accretion of the discount on convertible debt of $1.3 million, and depreciation and
amortization of $1.1 million. See Note 9, "Convertible Debt and Convertible Preferred Stock" to the combined and consolidated financial statements included elsewhere in this prospectus
for additional information regarding the calculation of the fair value of the financial instruments and the accretion of the discount on convertible debt. The most significant changes in operating
assets and
liabilities were the $16.1 million use of cash related to the increase of our inventories, partially offset by $12.0 million of cash generated by the increase in accounts payable,
$6.1 million of cash generated by the increase in deferred revenue, and a $3.1 million increase in other current liabilities. The inventory use of cash and the source of cash related to
accounts payable were primarily to build inventory in the U.S. to support the growth in operating activities. The source of cash related to deferred revenue is primarily due to the timing of payments
received in advance of vehicle delivery. The source of cash related to other liabilities, which will fluctuate from period to period based on the timing of underlying transactions, is comprised
primarily the result of a $4.0 million accrual for the anticipated settlement of a lawsuit. See Note 13, "Commitments and Contingencies" to the combined and consolidated financial
statements included elsewhere in this prospectus for additional information regarding this lawsuit.
Our
net cash used in operating activities totaled $12.6 million for the year ended December 31, 2009. Our net cash used in operating activities for 2009 was comprised
primarily of our net loss of $17.5 million combined with $7.3 million of cash used to support changes in operating assets and liabilities, partially offset by $12.3 million of
non-cash charges and credits. The non-cash charges and credits primarily consist of the provision for warranty charge of $4.6 million, provision for inventory impairment
of $4.4 million, primarily as the result of our lower of cost or market adjustment, share-based compensation of $1.5 million, depreciation and amortization of $0.8 million, and
accrued paid-in-kind interest on our Series A debentures of $0.4 million. The most significant changes in operating assets and liabilities were the
$5.4 million use of cash related to the increase of our inventories, primarily related the initiation of operating activities in the United States, the $1.1 million use of cash related
to other current liabilities, primarily the result of payments related to existing warranty liabilities, and the $0.9 million use of cash related to other current assets, primarily as a result
of advanced shipment deposits to suppliers related to commencing operations in the United States.
Our
net cash used in operating activities totaled $26.4 million for the year ended December 31, 2008. Our net cash used in operating activities for 2008 was comprised
primarily of our net loss of $22.3 million combined with $12.4 million of cash used to support changes in operating assets and liabilities, partially offset by $8.3 million of
non-cash charges and credits. The non-cash charges and credits primarily consist of the provision for inventory impairment of $5.9 million, primarily as the result of
our lower of cost or market adjustment, provision for warranty charge of $1.4 million, and depreciation and amortization of $0.8 million. The most significant changes in operating assets
and liabilities were the $11.3 million use of cash related to the increase of our inventories, the $4.2 million
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use
of cash related to accounts payable, and the $2.6 million source of cash related to trade accounts receivable. During the last part of 2007 and early 2008, our business was improving and,
accordingly, we had an increase in receivables at the end of 2007 and we were building inventory in 2007 and early 2008 to support anticipated growth. The increase in inventory also increased our
payables as of the end of 2007. We did not realize our anticipated growth during 2008 and sales weakened during the last half of the year. As a result, payables decreased as we slowed our inventory
purchases, inventory increased as we slowed production, and receivables decreased as we had fewer sales.
Cash flows used in investing activities
Our net cash used in investing activities principally relates to investments in processes and infrastructure that enable us to expand
our production and operating capabilities. Capital expenditures were $1.7 million, $1.7 million, $0.8 million and $0.5 million for the six months ended June 30, 2011
and the years ended December 31, 2010, 2009 and 2008, respectively. Capital expenditures for the six months ended June 30, 2011 and for the year ended December 31, 2010 were
primarily related to the acquisition of tooling to support our growing operations in the United States, the acquisition of computer and related equipment to support the increase in staffing in the
United States and the assembly of vehicles to use as demonstration vehicles and for research and development testing.
Cash flows provided by financing activities
During the six months ended June 30, 2011, our cash provided by financing activities amounted to $30.3 million. This
source of cash is primarily comprised of $37.8 million of net proceeds from the issuance of our Series B preferred stock, partially offset by $6.5 million of payments made to
Tanfield related to our acquisition of Smith UK and $0.8 million of deferred offering costs.
During
the year ended December 31, 2010, our cash provided by financing activities amounted to $13.7 million. This amount is comprised primarily of proceeds from the
issuance of our Series A debentures and bridge notes of $14.8 million, partially offset by the related $0.9 million of debt issuance costs.
During
the year ended December 31, 2009, our cash provided by financing activities amounted to $14.3 million and was comprised primarily of $10.4 million of proceeds
received from the issuance of units consisting of Series A debentures and common stock, partially offset by the related debt issuance costs of $0.4 million. The net cash provided by
Tanfield during the year ended December 31, 2009 amounted to approximately $4.3 million.
During
the year ended December 31, 2008, Tanfield provided approximately $27.4 million of cash to Smith UK. Smith US was not yet in existence and, therefore, did not have
any financing activities.
Series A debentures
From March 2009 through January 2010, we sold in a private placement 111.25 units for aggregate proceeds of $11.1 million. We
received aggregate proceeds from this financing of $10.4 million in 2009 and of $0.7 million in 2010. Each unit consisted of one Series A debenture in the principal amount of
$100,000 and 6,666 shares of our common stock. Each Series A debenture has a five year term and bears interest, payable in shares of our common stock, at the rate of 10% per annum. The
Series A debentures are secured by all of our assets. Subject to prepayment, acceleration or conversion, interest and principal due on each Series A debenture will be payable at the end
of the five year term. The Series A debentures are convertible, at the option of the holder, at 80% of the price at which shares of our common stock are valued in this offering or, if earlier,
80% of the price at which shares of our common stock are sold in a corporate reorganization. We may prepay principal and interest on the Series A debentures at any time without penalty.
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As
of June 30, 2011, we have outstanding the $11.1 million in principal amount of Series A debentures, along with accrued interest of approximately
$2.2 million. Holders of $            in principal amount of our Series A debentures have notified us of their election to convert their debentures, including accrued interest,
into
shares of our common stock immediately following the closing of this offering. We intend to use $            of the net proceeds to use of this offering to prepay the remaining
$            
principal amount of Series A debentures and accrued interest thereon.
Bridge notes
From March 2010 through October 2010, we sold $14.2 million of bridge notes in a private placement. Each bridge note issued
included a detachable warrant, with a stated per share exercise price of $0.01, that allows the holder to purchase 25% of the number and type of security into which the bridge note was convertible.
The stated term of each bridge note was the lesser of one year from the issuance date or the date of an equity offering resulting in gross proceeds to us of at least $20.0 million, or a
qualified offering. The bridge notes were unsecured obligations of ours and ranked senior to our Series A debentures. Interest on the bridge notes was payable in kind at a rate of 12% per
annum. Upon a successful qualified offering, the principal and interest became due and payable immediately or, at the option of the holder, the principal plus accrued
paid-in-kind interest could be converted into shares of the equity security issued in the qualified offering at a conversion price equal to the price per share of the equity
securities issued in the qualified offering.
The
warrant included in each unit was exercisable at the option of the holder from the date of the qualified offering through the second anniversary of the issuance date of the warrant.
The bridge note did not need to be converted in order for the holder to exercise the warrant.
Series B preferred stock
During March 2011, in a private placement we sold approximately 3,239,000 shares of our Series B preferred stock for cash
proceeds of $39.0 million. We also issued an additional approximate 1,570,000 shares of Series B preferred stock upon the conversion of our outstanding bridge notes and the holders'
exercise of the related warrants, as this private placement constituted a qualified offering. There was $14.2 million in principal amount of bridge notes outstanding with accrued
paid-in-kind interest of $1.1 million as of the date on which the bridge notes converted. We also paid in cash approximately $171,000 to holders who elected not to
convert a portion of their bridge notes. Shares of our Series B preferred stock have the right to vote, on an as-converted basis, together with shares of our common stock on all
matters which are subject to a vote of our common stock, and also have separate voting rights with respect to certain amendments of our second amended and restated certificate of incorporation and
certain liquidation events. Our Series B preferred stock has a liquidation preference of $12.04 per share (subject to adjustment) over our common stock. Our Series B preferred stock is
convertible, on a one-to-one basis, into shares of our common stock at any time at the election of the holder or automatically in the event of a firm commitment underwritten
public offering of our common stock, and is subject to certain anti-dilution protections.
Senior note financing
On September 14, 2011, we issued and sold the senior note for cash proceeds of $2.8 million to an existing stockholder.
The senior note accrued interest at 8.00% per annum and had a maturity date of December 31, 2011. The senior note was automatically convertible into shares of our equity securities immediately
prior to the closing of the initial public offering of our common stock and was redeemable by us upon the closing of a private placement of our equity securities that provides us with at least
$20.0 million in net proceeds. We exchanged the senior note in connection with our 2011 convertible notes financing discussed below.
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2011 convertible notes financing
Between October 7, 2011 and October 31, 2011, we issued and sold in a private placement convertible notes having an
aggregate principal amount of $30.0 million and seven-year warrants to purchase shares of our common stock for aggregate proceeds of $30.0 million. The aggregate proceeds
consisted of cash proceeds of $25.2 million, cancellation of the $2.8 million of indebtedness under the senior note and the conversion of approximately $2.0 million of the
outstanding balance of the purchase price we owe to Tanfield in connection with the acquisition of our Smith UK business. Each convertible note had a maturity date that was three years from its date
of issuance and accrued interest at a per annum rate of 8.50%, 12.00% and 15.00% for the first, second and third year of its term, respectively. Each convertible note provided for automatic conversion
into shares of our equity securities (i) upon the issuance of convertible notes resulting in net proceeds to us of at least $30.0 million, (ii) in connection with the first sale
of any class of our equity securities that results in net proceeds to us, when added to the net proceeds received by us from the issuance and sale of the 2011 convertible notes, of at least
$30.0 million, and (iii) upon the pricing of an initial public offering of our common stock that results in net proceeds to us of at least $50.0 million. We had the right to
prepay the 2011 convertible notes at any time using cash flow generated from our operations. Each warrant can be exercised at any time for the number of shares of our common stock equal to 30% of the
initial principal amount of the related note divided by the exercise price of $12.38. Each 2011 warrant automatically will be exercised upon the pricing of an initial public offering of our common
stock on a cashless exercise basis with a deemed purchase price per share equal to the price at which our common stock is offered to the public in such offering. The 2011 convertible notes converted
into shares of our Series C preferred stock upon our receipt of $30.0 million of proceeds from the 2011 convertible notes financing.
Series C preferred stock issuance
Between November 3, 2011 and November 8, 2011, we issued 2,431,170 shares of our Series C preferred stock in
connection with the conversion of all of our outstanding 2011 convertible notes. We did not receive any additional cash proceeds upon the conversion of the 2011 convertible notes into Series C
preferred stock. Shares of our Series C preferred stock have the right to vote, on an as-converted basis, together with shares of our Series B preferred stock and common
stock on all matters which are subject to a vote of our common stock, and also have voting rights, both together with our Series B preferred stock and as a separate class, with respect to
certain amendments of our third amended and restated certificate of incorporation and certain liquidation events. Our Series C preferred stock has a liquidation preference of $12.38 per share
(subject to adjustment), which is pari passu with the liquidation preference of our Series B preferred stock. Our Series C preferred stock is convertible, on a
one-to-one basis, into shares of our common stock at any time at the election of the holder or automatically in the event of a firm commitment underwritten public offering of
our common stock, and is subject to certain anti-dilution protections. The holders of at least a majority of the outstanding shares of Series B preferred stock and Series C
preferred stock, voting together as a single class, can require us to
redeem all outstanding shares of Series B preferred stock and Series C preferred stock on or after March 1, 2018.
CONTRACTUAL OBLIGATIONS
The following table shows our contractual payment obligations for our long term debt and future purchase obligations as of
December 31, 2010. We did not have any unrecognized tax benefits as of
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December 31,
2010. Interest on our convertible debt is calculated based on the contractual loan maturity at the stated interest rate in effect at December 31, 2010 (in thousands):
Certain Contractual Obligations
Total
Less than
1 year
1 - 3
Years
4 - 5
years
After 5
years
Convertible debt
$
25,275
$
14,150
$
—
$
11,125
$
—
Interest payable in kind
8,375
1,742
—
6,633
—
Interest payable in cash
—
—
—
—
—
Operating leases
842
574
194
74
—
Lawsuit settlement
4,000
2,000
2,000
—
—
Purchase orders, primarily for inventory
12,297
12,297
—
—
—
Total contractual payment obligations
$
50,789
$
30,763
$
2,194
$
17,832
$
—
The
following table shows our contractual payment obligations for our long term debt and future purchase obligations as of June 30, 2011. We did not have any unrecognized tax
benefits as of June 30, 2011. Interest on our convertible debt is calculated based on the contractual loan maturity at the stated interest rate in effect at June 30, 2011 (in thousands):
Certain Contractual Obligations
Total
Less than
1 year
1 - 3
Years
4 - 5
years
After 5
years
Convertible debt
$
11,125
$
—
$
2,889
$
8,236
$
—
Note payable—Tanfield
7,750
6,250
1,500
—
—
Interest payable in kind
6,633
—
1,758
4,875
—
Interest payable in cash
471
463
8
—
—
Operating leases
1,686
838
794
54
—
Lawsuit settlement
4,000
3,000
1,000
—
—
Purchase orders, primarily for inventory
18,783
18,783
—
—
—
Total contractual payment obligations
$
50,448
$
29,334
$
7,949
$
13,165
$
—
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In May 2011, the Financial Accounting Standards Board updated the guidance regarding certain accounting and disclosure requirements
related to fair value measurements. The updated guidance amends GAAP to create more commonality with International Financial Reporting Standards by changing some of the wording used to describe
requirements for measuring fair value and for disclosing information about fair value measurements. This update is effective for fiscal years, and interim periods within those years, beginning after
December 15, 2011. Early adoption is not permitted. We do not expect the adoption of this update to have a material impact on our financial position, results of operations or cash flows.
OFF-BALANCE SHEET ARRANGEMENTS
As of December 31, 2010 and June 30, 2011, we had no off-balance sheet arrangements that have or are
reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures,
or capital resources, except for operating leases.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign currency risk
Our purchases and sales are generally denominated in the local currency (U.S. dollar for U.S. operations and the British pound for U.K.
operations). As a result, we have limited direct exposure to currency risk and a 10% change in currency rate of exchange would have an immaterial impact on our cash flows. However, many of our
suppliers are either located in a foreign jurisdiction or source key components of their products from foreign jurisdictions. If our local currency depreciates significantly against the local currency
of our supply chain, it could cause our suppliers to raise their prices, which could adversely impact our operating results and cash flow.
Interest rate risk
We have issued only fixed rate debt with interest paid-in-kind. We have limited cash and generally do not
invest excess cash. As a result, a 10% change in interest rates would have an immaterial impact on our cash flows.
INTERNAL CONTROL OVER FINANCIAL REPORTING
Material weaknesses
In connection with the preparation of our combined financial statements as of and for the years ended December 31, 2010, 2009
and 2008, we identified material weaknesses in our internal control over financial reporting existing as of December 31, 2010. A material weakness is defined as a deficiency, or combination of
deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be
prevented or detected on a timely basis.
These
material weaknesses were as follows:
•
We did not have an adequate number of personnel in our accounting and finance department with sufficient technical
accounting expertise and, as a result, we could not evaluate in a timely manner the accounting and financial reporting implications of our business transactions. For example, our inventory costing
process was inadequate to produce an appropriate value of cost of revenue and we did not properly manage the accrual process related to cutoffs at the end of reporting periods.
•
We did not maintain adequate segregation of duties within the accounting and finance department and, as a result, the
company had an increased risk of fraudulent transactions. For example, we did not have appropriate segregation of duties between transaction origination and account reconciliation.
•
We did not design or maintain effective operating control activities or information technology controls over the financial
statement close and reporting process in order to ensure the accurate and timely preparation of financial statements. For example, we did not compare our actual results to our budget and we allowed
individuals to process journal entries without supervisory review and approval. In addition, we had not established information technology control policies and procedures that were sufficient in the
circumstances to support accurate and timely financial information processing.
We
are in the process of taking necessary steps to remediate the material weaknesses that we have identified. We will continue to review, revise, and improve the design and operating
effectiveness of our internal controls as appropriate. Although we have made enhancements to our control procedures, the material weaknesses will not be remediated until the necessary controls have
been implemented and are operating effectively.
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Remediation efforts
Our remediation efforts for these material weaknesses have included or will include:
•
hiring of accounting staff and retention of consultants with the critical skill sets to support accurate and timely
financial reporting;
•
implementing a financial close schedule;
•
identifying activities where staffing size or other factors hinder adequate segregation of duties and either modifying the
duties of the individuals or implementing appropriate monitoring controls to reduce fraud risks to an acceptable level;
•
designing and documenting key financial and information technology controls, and developing and implementing processes and
procedures to support these key controls; and
•
devoting resources to implement additional system functionality that will enhance our ability to establish automated
accounting controls and systematically define segregation of duties.
While
we are in the process of taking necessary steps to remediate the identified material weaknesses, the remediation process will require significant time and resources and we do not
know the specific timeframe required to fully remediate these material weaknesses. Additionally, we will incur both one-time and recurring incremental costs associated with this
remediation process. While we anticipate we will fully remediate these material weaknesses, we cannot assure you we will do so, which could impair our ability to satisfy our SEC reporting
requirements.
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BUSINESS
OUR COMPANY
Company overview
We design, produce and sell zero emission commercial electric vehicles designed to be a superior performing alternative to traditional
diesel trucks due to higher efficiency and lower total cost of ownership. We believe we are the only vehicle manufacturer selling to major commercial fleets in the United States and Europe that
exclusively produces electric vehicles. Our vehicle designs leverage over 80 years of market knowledge from selling and servicing electric vehicles in the United Kingdom. This experience has
led to the development of our advanced powertrain (Smith Drive), power management (Smith Power) and telemetry (Smith Link) technologies. We believe that these technologies will drive improved vehicle
performance, provide us with increased control over supply chain quality and reduce the upfront cost of our vehicles.
Unlike
companies that have introduced electric passenger vehicles, we focus on the production and sale of commercial electric vehicles that primarily address the needs of
medium-duty commercial fleet operators with depot-based operations and predictable daily service routes of up to 120 miles. We are the only company focused on producing and globally
offering an all-electric commercial vehicle having a GVW between approximately 16,500 and 26,400 pounds (the Smith Newton). We also produce the Smith Edison, which is a lighter duty
vehicle than the Newton that is sold in the United Kingdom and in other selected markets worldwide. As part of our continued focus on product development, we plan to introduce a Newton model that is
configured as a step van in the United States in early 2012. Our vehicles feature a battery system that is scalable to meet the varying range needs of commercial fleets and that provides a lower total
cost of ownership than that of a conventional diesel vehicle. We believe electric vehicles are ideally suited for the cost conscious commercial vehicles market because:
•
lower cost per mile
—on a per mile basis electric power to
charge our vehicles costs significantly less than diesel fuel;
•
less volatility
—the cost of electricity is considerably less
volatile than the price of diesel fuel;
•
less maintenance
—electric vehicles require less maintenance
than diesel vehicles due to the fewer number of moving parts in an electric powertrain than in a diesel powertrain;
•
minimal infrastructure requirements
—most commercial vehicles
in our target market operate from the same location and follow specific routes, eliminating the need for distributed charging infrastructure and concerns over limited range; and
•
fuel efficient with low environmental impact
—commercial fleet
operators are under government and popular pressure to improve fuel mileage, cut emissions and reduce noise associated with diesel powered trucks.
Demand
for our vehicles is growing as customers recognize their economic benefits. Additionally, in the near term we believe that governmental and popular support for companies that
purchase environmentally friendly transportation will accelerate demand for our vehicles. Over the twelve months ended September 30, 2011, we sold 320 vehicles, and as of October 31,
2011 we have an order backlog of 120 vehicles, representing vehicle revenue of $15.7 million, and have allocated nearly all of our estimated 540 production slots through July 2012. In addition
to the 120 vehicles included in our order backlog, we have written indications of interest from existing and potential customers for approximately 2,220 vehicles for requested delivery spanning the
period 2012 through 2015. We are actively involved in discussions with new and existing and potential customers on an ongoing basis and expect to continue to allocate additional production slots and
increase our order backlog.
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We
sell our vehicles through our direct sales force, as well as limited third party distribution agreements. We sell our vehicles to commercial fleet operators across multiple industries
including food & beverage, utility, telecommunications, retail, grocery, parcel and postal delivery, school transportation, military and government. Our customers include the following:
Food & Beverage
Utilities
Retail
Grocery
Package Delivery
Military
•
The Coca-Cola Company
•
Frito-Lay North America, Inc.
•
Kansas City Power & Light
•
Staples, Inc.
•
Duane Reade Inc.
•
Sainsbury's
•
DHL
•
FedEx
•
TNT Express
•
U.S. Army
•
U.S. Navy
•
U.S. Marine Corps
Our
sales strategy is focused on selling to industry-leading companies and government entities that operate substantial, well-recognized, medium-duty commercial
vehicle fleets and that have the corporate or public commitment and resources to support and sustain the development of the commercial electric vehicle industry. We offer a differentiated approach to
commercial vehicle sales and service that departs from traditional truck sales and service models. Our approach involves a comprehensive plan for the pilot and roll-out of our electric
vehicles, as well as the ongoing replacement of existing commercial vehicles with our electric vehicles, which is tailored to the individual needs of our customers. This plan includes the development
of a multi-year purchasing forecast to help the customer systematically integrate our vehicles into their fleets, as well as analytics that provide the expected economic and environmental
impact of fleet conversion. As a part of this approach, we offer guidance to our customers regarding how to most effectively use and operate their electric vehicles and on integrating electric
vehicles into their existing fleets or transitioning to all-electric vehicle operations. We believe that our strategy of targeting industry-leading companies and providing them with an
individualized sales and service solution has elevated our public profile, enhanced the credibility of our vehicles in the marketplace and made our customers advocates of our sales approach and our
vehicles, all of which enhances our ability to sell vehicles to new customers.
As
a part of our sales strategy, we separately present to our customers the base vehicle price and the battery system price. We believe that, in most cases, our base vehicle price is
competitive with or a slight premium to the price of a diesel-fueled vehicle with a comparable GVW. Our approach to pricing allows customers to compare the relative merits of a diesel truck's low cost
energy storage system (the fuel tank) and more expensive and volatile energy cost (the per gallon price of diesel fuel) with our vehicle's higher cost energy storage system (the battery) and lower and
more predictable energy cost (the per kilowatt hour price of electricity). We believe these comparisons make our vehicles more attractive to customers than traditional diesel options, particularly
during periods of rising fuel prices, even when the social and environmental benefits of our vehicles are ignored.
We
currently design, produce and sell vehicles based on two platforms, the Smith Newton and the Smith Edison, both of which can be configured for multiple applications. The Newton has a
GVW of approximately 16,500 to 26,400 pounds, a payload capacity of approximately 6,100 to 16,200 pounds and a range of up to 50 to 150 miles depending on vehicle specification and battery
configuration. The Newton, which is sold in the United States and internationally, is used in a wide range of general delivery applications, as well as in specialty applications such as refrigerated
delivery, military transport and boom truck. In November 2011, less than 24 months after the first sale of the Smith Newton in the United States, we introduced a second generation Newton, which
incorporates our Smith Drive, Smith Power and Smith Link technologies. We also are developing a Newton model that will have a GVW of approximately 33,000 pounds to meet the needs of delivery and
transit customers, which we expect to be available in mid-2012.
The
Smith Edison, which is a lighter duty vehicle than the Newton, is sold in the United Kingdom and in other selected markets worldwide. The Edison has a GVW of approximately 7,700 to
10,100
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pounds,
a payload capacity of approximately 1,600 to 5,100 pounds and a range of up to 55 to 110 miles depending on vehicle specification and battery configuration. The Edison is used in a wide range
of service and delivery applications, as well as specialty applications such as refrigerated delivery, utility boom and shuttle service. We intend to continue to develop and introduce a next
generation Smith Edison that utilizes our Smith Drive, Smith Power and Smith Link technologies.
We
also are developing and plan to introduce in early 2012 a Newton model that is configured as a step van. We expect this model will have a GVW of approximately 14,000 to 22,000 pounds,
a payload capacity of approximately 2,700 to 10,000 pounds and a range of up to 40 to 120 miles depending on battery configuration. We expect the vehicle will be used primarily for delivery of
parcels, uniforms and baked goods. The Newton step van will utilize our Smith Drive, Smith Power and Smith Link technologies.
Our
production operations leverage our supply chain of component manufacturers and allow us to focus on vehicle assembly. This focus contributes to our low capital expenditure
requirements and rapidly scalable capacity, and makes our decentralized production strategy financially advantageous. To continue to drive and sustain the economic advantage of our vehicles over
diesel trucks, we are working
to reduce our materials, operating and production costs, which we expect will reduce the prices of our vehicles and improve our gross margin. We have implemented a three-phased approach to reducing
costs, which we refer to as our "cost down" initiative, which we believe will help us achieve these goals. The first phase was focused on transitioning our supply chain from low volume suppliers to a
medium-volume automotive-grade supply chain. The second phase involves the transition from battery and powertrain systems produced by third party suppliers to our Smith Power and Smith Drive systems
and the implementation of multi-source volume purchasing strategies. The third phase will involve the transition of the supply chain for our ancillary components to higher-volume and lower-cost
suppliers. We expect to complete all three phases of our current cost down initiative in the first half of 2012. Thereafter, we expect to pursue continuous improvements in our supply chain and vehicle
production costs.
We
have one production, research and development, sales and service facility in Kansas City, Missouri and one outside of Newcastle, England. To execute on our decentralized production
strategy, we plan to open sales, service and assembly facilities in targeted urban areas in the United States and abroad, beginning with facilities on the east and west coasts of the United States. We
expect to open the first of these facilities in New York City in the first half of 2012. We also have an established service base in the United Kingdom, where we operate four service facilities and a
fleet of approximately 100 service vehicles. Our U.K. service teams maintain both electric and traditional diesel vehicles.
Smith
Europe and its predecessor entities have existed since the early 1920s. We were incorporated in Delaware in 2009 and have been operating on a consolidated basis with Smith Europe
since January 2011, when we acquired the business of Smith UK. Our corporate headquarters are located in Kansas City, Missouri. We began selling the Smith Newton in the United States in December 2009
and, as of September 30, 2011, have sold 283 vehicles in the United States. Between January 1, 2008 and September 30, 2011, we sold an additional 272 vehicles outside of the U.S.
We have approximately 280 employees worldwide. Our revenue for our fiscal years 2008, 2009 and 2010 and the six months ended June 30, 2011 was $32.4 million, $22.9 million,
$35.6 million and $37.6 million, respectively. Our revenue consisted of $14.2 million in vehicle revenue and $18.2 million in service and repairs revenue for 2008;
$8.2 million in vehicle revenue and $14.6 million in service and repairs revenue for 2009; $23.8 million in vehicle revenue and $11.8 million in service and repairs revenue
for 2010; and $31.9 million in vehicle revenue and $5.7 million in service and repairs revenue for the six months ended June 30, 2011. Our revenue has grown from
$15.8 million for the six months ended June 30, 2010 to $37.6 million for the six months ended June 30, 2011. We operate our business in two reportable segments:
(i) Zero Emission Vehicles and (ii) Maintenance Services. See Note 16,
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"Information
about Segments and Geographic Areas" to the combined and consolidated financial statements included elsewhere in this prospectus for information about our revenues on a segment basis and
our revenues from the geographic areas in which we sell our vehicles.
Smith UK acquisition
Smith Europe consists primarily of the Smith UK business we acquired from Tanfield effective January 1, 2011. We believe our
acquisition of the Smith UK business provides us with:
•
a platform on which we can expand our business internationally, particularly in Europe and Asia, where fuel costs exceed
those in the United States;
•
enhanced product development capabilities as a result of access to Smith UK's engineering division;
•
access to recurring service-related revenues from Smith UK's fleet management services; and
•
Smith UK's existing vehicle technologies and the elimination of a royalty obligation to Tanfield. Prior to our acquisition
of Smith UK, Tanfield licensed to us the exclusive right to develop, test, manufacture, market, distribute, sell and service electric vehicles in North America under Tanfield's electric vehicle
intellectual property (other than trade and service marks). See "Relationships and Related Person Transactions—Tanfield Transactions" for additional information about this license
agreement. Smith Europe now owns the intellectual property rights we previously licensed from Tanfield.
OUR MARKET OPPORTUNITY
Medium-duty commercial vehicle market overview
Our primary market is commercial fleet purchasers of medium-duty vehicles, which are on-road vehicles with GVWs
ranging from 14,000 to 33,000 pounds. Medium-duty commercial vehicles are used in, among other things, urban applications such as grocery, package and beverage delivery, utility, and
school and shuttle buses. According to J.D. Power and Associates (Q3, 2011 Medium Duty World Truck Sales), global annual sales of on-highway medium-duty commercial trucks are
expected to reach 822,197 units in 2011, with a CAGR of 3.3% from 2011 to 2016. Based on our calculations, this equates to greater than a $40 billion total available market for these vehicles
worldwide. In relation to the
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overall
commercial vehicle market, the medium-duty commercial vehicle segment represents a niche opportunity for many traditional large-scale OEMs.
Source:
J.D. Power and Associates Global Commercial Vehicles Forecast published September 30, 2011
According
to Fleet Owner Magazine, medium-duty fleet operators have an estimated current installed base of 1.2 million vehicles in the United States. The primary
drivers impacting the purchase of these fleets are macroeconomic growth, industrial activity, fuel and maintenance costs and government spending.
Opportunity for commercial electric vehicles
It is our belief that the traditional medium-duty commercial vehicle market is plagued with industry-wide
challenges that incumbent vehicle manufacturers will struggle to address. Incumbent vehicle manufacturers' reliance on diesel-fueled engines as their principal powertrain technology has raised
environmental concerns and created dependence on oil largely imported from foreign nations, which has led to increased regulation, and has exposed fleet owners to fuel price volatility and significant
operating costs.
We
believe that shifting preferences among commercial vehicle fleet buyers together with increasing government regulation and available government incentives will result in significant
growth in the market for commercial grade electric vehicles, especially in our targeted market. We believe many fleet buyers are increasingly willing to consider purchasing electric vehicles due to
the economic, environmental, regulatory and national security consequences of using gasoline and diesel-powered vehicles, as well as the performance and cost characteristics exhibited by recently
developed, alternative vehicles. We also believe government regulations and incentives are accelerating the growth of the commercial electric vehicle market.
The
medium-duty fleet market represents an opportune target market for us, as we believe vehicles in this segment are often operated within urban centers, are driven at
speeds below 50 mph and utilize depot-based routes with predictable distances, typically 50 to 100 miles per day. Additionally, fleet owners tend to maintain a large number of vehicles, typically
purchase in volume, and can leverage economies of scale in the operation and servicing of such vehicles. Fleet size varies depending on the company, but large consumer products and package delivery
companies such as Frito-Lay, Coca-Cola and FedEx have fleets in excess of 20,000 vehicles, with an average service life of eight years. As a result, fleet owners place
significant importance on total cost of ownership, which
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includes
a vehicle's upfront cost as well as ongoing operating costs such as fuel and maintenance, and is where electric vehicles provide considerable advantages over both diesel-fueled and hybrid
vehicles. Fuel, oil, service and maintenance represent material operating expenditures for commercial fleet owners. Commercial electric vehicles eliminate the need for ongoing fuel and oil consumption
and the lower number of overall parts in an electric vehicle reduces the amount of service and maintenance necessary to operate the fleet. According to J.D. Power and Associates, on average, gasoline
and diesel trucks in this category have a fuel economy of approximately 8.4 miles per gallon. We estimate that diesel trucks in this category cost between $0.15 and $0.23 per mile to maintain.
Worldwide,
governments are offering subsidies and incentives helping accelerate the adoption of commercial electric vehicles. For example, in the United States, the DOE's Clean Cities
program and the EPA's National Clean Diesel Funding Assistance Program provide purchasers of electric vehicles
with subsidies and incentives and under the Obama administration's Green Fleet Initiative, by 2015 all new vehicles purchased for America's federal agencies will be electric, gas-electric
hybrid, or alternatively fueled. See "—Governmental Programs and Incentives." In Europe, the European Union has passed more restrictive vehicle emissions standards, several countries have
instituted direct subsidies and significant tax exemptions for electric vehicles and some cities exempt electric vehicles from congestion charges. In Asia, the Chinese government has established a
pilot program that provides subsidies to purchasers of electric vehicles as well as subsidies for infrastructure installation.
Challenges facing incumbent vehicle manufacturers
Incumbent vehicle manufacturers face significant challenges in continuing to meet the needs of customers in our target market. These
challenges include having to redesign vehicles in order to meet newly enacted and proposed environmental and safety regulations and the following:
•
Dependence on diesel powertrains.
While a limited number
of manufacturers have invested in a plug-in electric vehicle program, we believe a majority of incumbent commercial vehicle manufacturers continue to emphasize investment in diesel engine
technologies over investment in fully electric technologies because of their need to support their existing revenue base and core competencies.
•
Limited electric powertrain expertise.
To date, incumbent
commercial vehicle manufacturers have pursued multiple fuel technologies, including hydrogen fuel cell, hybrid and electric powertrain technologies. We believe that exploring such a diverse range of
programs while simultaneously continuing to invest in legacy diesel engine platforms has to date inhibited their ability to focus on a specific alternative fuel powertrain technology. As a result, we
believe incumbent commercial vehicle manufacturers currently have relatively limited electric powertrain expertise, especially with respect to sophisticated battery cooling, power, safety and
management systems.
•
Significant re-engineering and new product
development.
New product launches by incumbent vehicle manufacturers historically have required significant capital investments and
lengthy time periods between initial development and production. We believe the development process for an electric vehicle program could be particularly expensive for incumbent vehicle manufacturers
given their need to develop an entirely new powertrain and the sophisticated battery cooling, power, safety and management systems necessary to support such a program. Additionally, manufacturers of
commercial electric vehicles must produce vehicles of sufficient grade, weight and capability to service the needs of a diverse range of end markets, such as the food and beverage, military, parcel
delivery, utilities and commuter transport markets. These diverse needs historically have added complexities for manufacturers of diesel-fueled vehicles and further complicate engineering for those
designing vehicles with new technologies, such as all-electric powertrains.
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•
Lack of robust supply chain for medium-duty electric
vehicles.
The medium-duty commercial vehicle market represents a niche market to several traditional large scale OEMs, some
of which have exited the market entirely over the last several years. This limited emphasis on medium-duty commercial vehicles has made it more difficult to develop and mature the supply
chain in the electric vehicle market.
•
Inability to scale production as a result of high upfront cost of
vehicles.
The relatively high initial cost of commercial electric vehicles has limited adoption, resulting in a lack of meaningful
production volumes and manufacturers' inability to increase capacity to recognize substantial cost reductions. Expensive battery technology and powertrain components combined with early stage
production ramps have limited vehicle manufacturers' ability to reduce costs and deliver a competitively priced option to market. While the fuel and maintenance cost advantages of electric vehicles
remain compelling, high upfront costs and low volumes have limited vehicle sales to early market entrants.
OUR COMPETITIVE STRENGTHS
We believe that focusing our business model on developing and integrating advanced vehicle technologies, manufacturing vehicles using a
decentralized, low cost
assembly strategy, and establishing a base of customer advocates that can accelerate the development of the commercial electric vehicle industry, distinguishes us from our competitors and will assist
us in maintaining our leadership position in the medium-duty commercial electric vehicle market. We believe that this focus and the following strengths position us well to capitalize on
the expected growth in demand for medium-duty electric commercial vehicles:
•
Focus on commercial electric vehicles.
We believe that
adoption of electric vehicles will be fastest in commercial applications where the economic benefits are greatest, and which have predictable routes and centralized charging, thereby avoiding range
anxiety and dependence on development of public infrastructure to support electric vehicle fleets. We believe our position as a leading provider of commercial electric vehicles enables us to benefit
from this trend.
•
First mover with established major commercial fleet relationships in the United States, Europe and
Asia.
We believe we are the only vehicle manufacturer selling to major commercial fleets in the United States and Europe that
exclusively produces electric vehicles. We have sold trucks to and are currently negotiating additional orders with customers such as Staples, Frito Lay/PepsiCo, Coca-Cola, TNT Express and
DHL, some of which are among the largest purchasers of medium-duty trucks in the world. We believe that our established relationships with large customers position us to receive additional
orders from them, which will increase the recognition of our products with prospective customers and reinforce our brand equity.
•
Proven ability to reduce the cost of our vehicles.
We
believe that wider adoption of commercial electric vehicles can be achieved by reducing their cost. We believe our component sourcing strategy coupled with our engineering expertise will allow us to
continue to reduce the cost of our vehicles and increase their attractiveness to customers.
•
Low capital intensity of production.
We believe our
ability to achieve a relatively low level of capital intensity with respect to our production operations will enable us to expand more rapidly and deliver high returns on invested capital. We assemble
our vehicles using components manufactured by pre-qualified third party vendors using our specifications and designs. By purchasing components and focusing on assembly, we are able to
leverage medium-volume automotive-grade suppliers who have already achieved economies of scale, allowing us to avoid significant fixed costs and capital investment.
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•
Our vehicle and system design facilitates component-based cost reduction and protection of our trade secrets and
know-how.
We believe our component-based approach allows us to achieve lower costs when compared to buying entire systems,
which typically carry higher margins for suppliers, and more easily and fairly fosters competition among multiple suppliers, as greater sourcing options exist for components as compared to systems.
For example, our recently introduced Smith Power battery management system allows us to purchase battery modules, rather than entire battery systems, and over time we expect to purchase battery cells
and assemble our own battery modules into packs, thereby further reducing our costs. Our powertrain provides us the ability to purchase at either a system or component level, such that we are able to
purchase motors, inverters, controllers and transmissions separately from suppliers. Our approach also allows us to continuously develop our intellectual property and to better protect our trade
secrets and know-how because no one supplier has access to our complete system design.
•
Modular battery system design that allows customers to configure each truck's range based on its application and
significantly impact the total cost of vehicle operation.
We have designed our battery system to be modular so the same vehicle can
accept battery packs with different capacities. For example, the Smith Newton has multiple battery pack options depending on the customer's range requirements and duty cycle. The flexibility to
correctly size each vehicle's battery pack allows customers to select the most cost effective solution for their particular application, with the option to add additional capacity in order to
repurpose vehicles for new applications in the future. Together, we believe these options allow our customer to maximize each vehicle's economic return, thereby increasing the attractiveness of our
vehicles.
•
Focus on medium-duty commercial vehicles positions us well to avoid direct competition with
heavy-duty truck and light-duty automotive OEMs.
Incumbent heavy-duty truck manufacturers and
light-duty automotive OEMs generally are not as focused as we are on sales of medium-duty trucks due to the relatively limited sales volume opportunity. We believe that
as an early entrant with exclusive focus on medium-duty vehicles, we are well positioned to avoid direct competition with the much larger organizations that produce heavy- and
light-duty trucks.
OUR STRATEGY
We intend to be a leading global producer of medium-duty commercial electric vehicles. Key elements of our strategy
include:
•
Focusing on large, well-recognized commercial operators to establish long-term customer
advocates.
We are focusing our sales efforts on industry-leading companies and government entities that operate substantial,
well-recognized, medium-duty commercial vehicle fleets. These entities have not only the resources available to purchase our vehicles, but also the corporate or public
commitment to support and sustain the development of the commercial electric vehicle industry. We believe this strategy will increase our sales and provide us with market credibility. Additionally,
these customers typically have well-defined fleet replacement strategies that strengthen our visibility with respect to customers' purchasing cycles and future supply needs.
•
Leveraging our existing vehicle technologies and platforms to diversify applications and sales
channels.
We are leveraging our current vehicle technologies and platforms to diversify applications in both the United States and
Europe. We anticipate these new vehicle models will broaden our reach within our addressable market and result in increased sales to our existing customers. In addition to offering vehicles with a
wider range of GVWs, we are working with several truck and bus body manufacturers to provide specialized vehicles, including a step van, shuttle and school buses, aircraft ground service and military
transportation. These relationships will not only allow us to offer specialized models to our commercial fleet customers, but also could open new sales channels for us, as these manufacturers also may
purchase our vehicles for
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resale
to the end users. For example, in October 2011, Trans Tech Bus, a division of Transportation Collaborative Inc., unveiled its Newton eTrans electric Type-A school bus
prototype, which is based on the Newton platform.
•
Continuing to focus on technological innovation to reduce the initial cost of our
vehicles.
We are focused on improving our vehicle technologies and broadening our proprietary intellectual property rights over systems
and components incorporated into our vehicles. These strategies are intended to improve our vehicle performance and reliability, strengthen our competitive position and lower our vehicle costs. For
example, our recently introduced Smith Power battery management system allows us to purchase battery modules, and ultimately will allow us to purchase lithium-ion cells, from various
pre-qualified manufacturers. We expect that this ability to source from multiple suppliers will enable us to reduce the cost per kilowatt hour of the batteries used in our vehicles and
improve reliability.
•
Establishing sales, service and assembly facilities in selected local
markets.
We intend to establish sales, service and assembly facilities in select urban areas in different regions of the United States
and abroad. Our initial plans include opening facilities on the east and west coasts of the United States, including a facility in New York City, which we anticipate will open in the first half of
2012. In addition to increasing our production capacity, these new facilities will allow us to provide localized sales and service and will significantly reduce costs associated with shipping
completed trucks from our existing U.S. and U.K. locations to our customers.
•
Supporting and leveraging our customers' brands through branding synergies and
co-promotions.
We intend to continue helping our customers build and achieve corporate sustainability objectives and enhance
their brand images. Our efforts include co-promotional media and joint presentations at industry conferences and other public events that highlight the ongoing replacement of our
customers' legacy diesel fleets with our environmentally-friendly, 100% electric vehicles.
•
Providing customized battery acquisition models to our
customers.
We intend to provide purchasing options for the battery system used in our vehicles that meet our customers' varying
purchasing strategies. For example, we intend to provide our customers with the flexibility to purchase complete vehicles that include battery systems or to purchase base vehicles and separately
acquire battery systems through leasing arrangements with third parties. In the future we may offer battery leasing arrangements to our customers.
•
Working with federal and state governments to promote the electric vehicle
industry.
We work with government authorities to promote the adoption of electric vehicles and believe we are
well-positioned to benefit from support for commercial electric vehicles. Government support for the development and use of commercial electric vehicles can accelerate their adoption. Such
support ranges from tax incentives, to end-user rebates for the purchase of electric vehicles, to consortium tenders for the purchase of electric vehicles in volume.
OUR VEHICLES
Our primary business is the development, production, sale and service of zero emission commercial electric vehicles. We aim to produce
commercial vehicles that are robust, economical and easy to drive. We currently produce and sell vehicles based on two platforms, the Smith Newton and the Smith Edison, both of which can be configured
for multiple applications.
Smith Newton
The Smith Newton is designed for predictable route, depot-based applications and is used in a wide range of general delivery
applications, as well as in specialty applications such as refrigerated
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delivery,
military transport and boom truck. The Newton has a GVW of approximately 16,500 to 26,400 pounds, a payload capacity of approximately 6,100 to 16,200 pounds and a range of up to 50 to 150
miles depending on vehicle specification and battery configuration. We produce and sell the Smith Newton in the United States and in the United Kingdom for use in the medium-duty
commercial vehicle market, and our vehicles currently are in use in the food & beverage delivery, utility, telecommunications, retail, office products, grocery, parcel delivery, school
transportation, military and government, facilities management and airport operations sectors. Additionally, the Smith Newton is the only all-electric commercial vehicle in the 21,000 to
28,000 pound GVW range on the United States Government Services Administration schedule, which provides a streamlined procurement process for federal customers wishing to purchase vehicles from us.
The
Smith Newton is designed as a chassis cab and can be configured with:
•
a flat bed,
•
a cargo box,
•
an electric boom for utility work that includes ancillary power options,
•
a refrigeration unit that provides a cooled compartment, and
•
transit, shuttle, or school bus seating.
The
Smith Newton battery system generally requires six to eight hours to fully recharge using a 240-volt power source and is available in the following five configurations to meet our
customers' maximum range and economic needs:
•
40 kilowatt hour, which provides a range of up to 50 miles on a single charge;
•
60 kilowatt hour, which provides a range of up to 70 miles on a single charge;
•
80 kilowatt hour, which provides a range of up to 90 miles on a single charge;
•
100 kilowatt hour, which provides a range of up to 110 miles on a single charge; and
•
120 kilowatt hour, which provides a range of up to 150 miles on a single charge.
We
plan to introduce a Newton model that is configured as a step van and incorporates our Smith Drive, Smith Power and Smith Link technologies in early 2012. We expect this model to have
a GVW of approximately 14,000 to 22,000 pounds, a payload capacity of approximately 2,700 to 10,000 pounds and a range of up to 40 to 120 miles depending on battery configuration. We expect the
vehicle will be used primarily for delivery of parcels, uniforms and baked goods.
We
also are developing a Newton model that will have a GVW of approximately 33,000 pounds to meet the needs of delivery and transit customers.
Smith Edison
The Smith Edison is used in a wide range of service and delivery applications, as well as specialty applications such as refrigerated
delivery, utility boom and shuttle service. The Edison has a GVW of approximately 7,700 to 10,100 pounds, a payload capacity of approximately 1,600 to 5,100 pounds and a range of up to 55 to 110 miles
depending on vehicle specification and battery configuration. We currently produce and sell the Smith Edison only through Smith Europe, although in the future we plan to introduce in selected
international markets a second generation Smith Edison that incorporates our Smith Drive, Smith Power and Smith Link technologies to address customers' needs for a smaller commercial electric vehicle
than the Smith Newton. The Smith Edison currently is in use in the postal and parcel delivery, logistics, facilities management, grocery, utility, airport operations and government sectors.
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The
Smith Edison utilizes a Ford Transit chassis and is available from us as a chassis cab, panel van or 12 to 17 seat minibus. The Edison chassis cab has a 40 kilowatt hour battery
system, which provides a range of up to 60 miles on a single charge. The Edison panel van and minibus are available with 36
and 50 kilowatt hour battery systems, which provide ranges of up to 60 miles and 110 miles, respectively, on a single charge. The Smith Edison battery system generally requires six to eight hours to
fully recharge using a 240-volt power source and we also offer a four hour fast-charging option.
OUR TECHNOLOGY
Our research and development efforts are focused on improving our existing vehicle technologies to improve vehicle performance and
reduce cost. As of September 30, 2011, we have 36 employees engaged primarily in vehicle engineering and development activities. While we undertake a number of research and development
activities on various aspects of our vehicles' performance, we have focused our research and development efforts on our Smith Drive, Smith Power and Smith Link technologies.
Smith Drive
Smith Drive is our physical vehicle drive and control system, which features a configurable drive controller with integrated inverters
for the management of auxiliary systems; permanent magnet motors, which increase motor efficiency; and an integrated control protocol with Smith Power that supports a common diagnostic interface.
Beginning in November 2011, we include this technology in all new vehicles we produce in the United States. We anticipate including this technology in all new Smith Newtons we produce in the United
Kingdom beginning in the first half of 2012.
Smith Power and existing battery technology
Smith Power is our battery system, which provides:
•
a battery management system with the capability to manage power at the battery cell level;
•
a pack integration strategy that facilitates the use of battery cells of varying sizes from different manufacturers;
•
active thermal management at the battery cell level;
•
the flexibility to allow for battery packs having varying energy storage capacities to meet specific vehicle applications;
and
•
an integrated control protocol with Smith Drive.
We
have designed our Smith Power system to permit flexibility with respect to battery cell chemistry, form factor and vendor that we adopt for battery cell supply. We maintain a database
of the many available lithium-ion cell vendors and chemistry types. We intend to incorporate into our battery systems the battery cells that provide the best value and performance, and we
expect this to continue over time as battery cells continue to improve in energy storage capacity, longevity, power delivery and cost. We believe this flexibility will enable us to continue to
evaluate new battery cells as they become commercially viable, and thereby optimize battery pack system performance and cost for our current and future vehicles. We believe our ability to change
battery cell chemistries and vendors while retaining our existing investments in software, electronics, testing and vehicle packaging, will enable us to quickly deploy various battery cells into our
products and leverage the latest advancements in battery cell technology.
Beginning
in November 2011, we include our Smith Power technology in all new vehicles we produce in the United States. We anticipate including this technology in all new Smith Newtons we
produce in the United Kingdom beginning in the first half of 2012.
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The battery technology and control mechanisms we currently use in our vehicles are designed to monitor, measure and control battery cells to prevent rapid
releases of the energy contained in the cells. The power system we currently use in our U.K.-produced vehicles and our Smith Power technology are based on a chemistry selected for its stability, and
the cells incorporated into these systems contain current separation mechanisms and venting technologies that passively contain any single cell's release of energy, which minimizes the spread of
energy to neighboring cells.
The
batteries installed in our vehicles generally require six to eight hours to fully recharge using a 240-volt power source. The charging duration is proportional to the starting state
of charge, which is the amount of unused battery capacity at the time charging begins. Factors that affect the amount of time needed to recharge the battery include the size of the battery, the
available power source for the charger at the charge location and the size of the charger. We align the size of the charger installed in our vehicles to the customer's chosen battery pack size in
order to limit the required charging time to six to eight hours using a 240-volt power source.
Smith Link
Smith Link is an onboard system that monitors and transmits the vehicle's vital statistics by general packet radio service (GPRS) to a
central server, allowing remote vehicle monitoring, diagnostics and reporting. Smith Link eliminates reactive service calls with effective, real time data, diagnostics and performance information,
which allows for more efficient fleet management. The operational data collected by Smith Link also supports continuous vehicle development and improvements. We install Smith Link in all of the
vehicles we produce.
Smith
Link provides:
•
fleet operators the ability to: (i) monitor the location and previous routes of their vehicles, (ii) analyze
the performance of their vehicles on a daily basis, (iii) proactively manage service, which reduces vehicle down time, (iv) better educate drivers about the performance of their vehicles
and (v) calculate and track return on investment and carbon emissions.
•
our service technicians the ability to remotely monitor customer fleets and individual vehicle systems to identify
possible future system issues, and remotely diagnose vehicle system faults and identify faulty components.
•
our engineering department the ability to identify failure modes and collect vehicle data that supports continuous
technology improvement.
We
have established a data warehousing platform to maintain the information collected by Smith Link, which will allow us to carefully analyze vehicle performance over time in order to
improve our technologies and help our customers maximize the productivity of their electric vehicles.
MANUFACTURING
Vehicle assembly
We currently assemble the vehicles we sell in the United States and Canada in our Kansas City, Missouri production facility. We
assemble the vehicles we sell in the rest of the world in our production facility located outside of Newcastle, England. Our Kansas City production facility is an approximately 85,100 square foot
repurposed facility located at the Kansas City International Airport. We currently have in place in this facility two production lines configured to produce a total of 100 vehicles per month operating
on a single production shift, assuming the timely availability of components. We are currently working with vendors in our supply chain to increase their capacity so that we may ramp to this
production level by mid-2012. Our U.K. production facility is an 80,000 square foot facility located outside of Newcastle, England. Historically we have produced at an average rate of approximately
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seven
vehicles per month in this facility, which we plan to increase to approximately 14 vehicles per month beginning in 2012.
We
believe that we will be able to increase the production rates at our existing production facilities through improvements in our assembly process and adding additional shifts. Long
term, however, we intend to expand our vehicle assembly operations through our network of sales, service and assembly facilities, rather than significantly increasing the production capabilities of
our existing facilities. Once a sales, service and assembly facility is open in a geographic market, vehicle assembly for sales made in that geographic market generally would be performed at that
facility.
Our
commercial electric vehicles are designed and assembled on what we refer to as a systems basis, which means that our assembly line is configured to facilitate vehicle assembly system
by system. Our assembly process consists of configuring an existing vehicle body and rolling chassis with the following systems:
•
the powertrain, which consists of the motor, transmission, inverter, gearbox and controller;
•
the battery system;
•
high voltage ancillary components, such as power steering, coolant and air conditioning;
•
a low level coolant energy recovery system; and
•
central control systems that use a dedicated electronic vehicle module to control the vehicle's high voltage ancillary
components and regenerative braking, as well as vehicle-based items such as stability and traction control.
We
believe that our systems-based approach to vehicle assembly allows us to be responsive to customer requirements, vehicle duty cycles and our customers' individual subsystem
specifications to ensure that energy efficiency is optimized while costs are minimized. Furthermore, we believe that our design and assembly process results in a vehicle that has the appearance and
familiarity of an internal combustion vehicle with the economy and user appeal of an all-electric vehicle. We believe that this approach maintains operator familiarity and thereby
accelerates the adoption of electric vehicle technology.
Our
assembly process leaves intact the vehicle's existing electrical system and all base vehicle functionality, but provides enhancements that optimize energy usage. For example, the
vehicle's brakes remain completely unchanged except for the addition of an electric pneumatic pump that allows for braking powered by our installed battery pack. All built-in safety
features on the base vehicle continue to comply with applicable regulatory requirements.
Assembly
of the Smith Edison differs somewhat from assembly of the Newton. We also assemble the Edison on a systems basis, however, unlike the Newton, where we begin the assembly process
with an unpowered cab and chassis, we begin assembly of the Edison with a complete Ford Transit vehicle. We remove the traditional powertrain and powered components of the vehicle and replace them
with our electric components. We then return the unused traditional vehicle components to Ford in exchange for price discounts on the purchased vehicle.
Supply chain
Our production operations depend on obtaining systems, components, raw materials, parts, manufacturing equipment and other supplies and
services from reliable suppliers in adequate quality and quantity in a timely manner. Our current supply chain is located globally, with approximately 31% of our suppliers located in North America and
68% located in Europe. See "—Key Suppliers" for information regarding our relationships with our significant system and component suppliers.
We
obtain components and raw materials from multiple sources whenever possible, similar to other vehicle manufacturers, however, certain of our primary vehicle systems and the components
and raw
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materials
used in our vehicles are purchased by us from a single source. We refer to these suppliers as our sole source suppliers. For example, we source the over 530 parts that comprise the
U.S.-produced Smith Newton from over 35 suppliers, including 22 sole source suppliers. We generally purchase materials pursuant to purchase orders placed from time to time and have a limited number of
long-term contracts or other guaranteed supply arrangements with our sole or limited source suppliers.
We
also are subject to fluctuations in the prices of the components and raw materials we use in our business as a result of our practice of purchasing systems, components and raw
materials through purchase orders. Prices for the systems, components and raw materials we use in our business fluctuate depending on market conditions and global demand. We believe that we have
adequate supplies or sources of availability of the systems, components and raw materials necessary to meet our production and supply requirements.
We
are implementing enterprise resource planning and management software to automate and improve our procurement and inventory processes and integrate them with our financial accounting
and business planning. We plan additional investment in our management systems to support further growth in our operations.
In
connection with our cost down initiative and transition to our Smith Power and Smith Drive systems, we have moved to a new supply chain, including suppliers with which we have limited
or no prior experience. While we experienced disruptions in our supply chain during the transition, over the long term, we do not believe the transition or any associated disruption will materially
and adversely affected our business.
Quality control
Our quality control efforts are divided between product quality and supplier quality, both of which are focused on designing and
producing products and processes with high levels of reliability. We have four dedicated quality control employees that work with our engineering team and our suppliers to help ensure that the product
designs meet functional specifications and durability requirements. Our quality control employees also work with our suppliers to ensure that their processes and systems are capable of delivering the
parts and components we need at the required quality level, on time, and on budget. Smith Europe received its ISO 9001 certification in August 2011. We are currently working to meet the
requirements for ISO certification for our U.S. operations.
Warranty policies
We sell our vehicles with standard component-based warranties under which each vehicle component is covered for a specific period of
time. The powertrain, cab and chassis are covered for 36 months, the air conditioning system and the low voltage batteries that operate ancillary systems in the vehicle are covered for
12 months and the primary battery system is covered for 60 months from the date on which we release the vehicle for shipment, in each case, subject to certain exclusions and exceptions.
See "—Key Suppliers" for information about the warranty terms provided by our suppliers for our key systems and components.
MAINTENANCE, SERVICE AND OTHER
We provide maintenance services for traditional diesel-fueled vehicle fleets and, as part of our legacy Smith UK business, distribute
forklifts for warehouse use through Smith Europe. From time to time we also may enter into agreements to retrofit customers' existing vehicle fleets by replacing traditional truck components with our
electric components.
After
sale, we generally maintain and service our customers' vehicles. Through Smith Europe, we also provide fleet maintenance services to operators of traditional diesel-fueled vehicle
fleets. This fleet maintenance business generated $11.7 million in revenue in 2010 for Smith UK. We believe that our
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fleet
maintenance business provides us with consistent cash flows and with opportunities to market our commercial electric vehicles to our fleet maintenance customers. We enter into fleet maintenance
contracts with certain of our customers under which we provide maintenance and repair services at rates that are agreed upon at the time we enter into the contract. These contracts typically are for
six-month periods. We also offer service-for-fee arrangements for services not covered under a fleet maintenance contract or under warranty, which are priced at the
time such services are provided.
In
addition to our facility located outside of Newcastle, England, we have four service facilities and a fleet of approximately 100 service vehicles throughout the United Kingdom that
maintain our customers vehicles. We currently service the commercial electric vehicles we have sold in the United States by sending technicians from our Kansas City, Missouri facility to the
customer's location. Services not covered under warranty are contracted for on an as needed basis and are priced at that time. Once we have established a sales, service and assembly facility in a
geographic area, that facility will be responsible for servicing the Smith vehicles operating in that area. We do not, however, expect to open sales, service and assembly facilities in all of the
geographic areas in which our existing and potential customers may operate our vehicles. In order to address the service needs of customers that are not in close geographic proximity to a sales,
service and assembly facility, we plan to deploy technicians from our closest facility to service the vehicles at the customer's location.
KEY SUPPLIERS
Our key suppliers and, where applicable, descriptions of our supply agreements with our key suppliers, follows.
Key suppliers with supply agreements
A123 Systems, Inc.
Since June 2011 we have purchased lithium-ion battery modules from A123 under a product sales agreement that became
effective in March 2011. Although we currently purchase five kilowatt hour modules, under the product sales agreement, we have the option to instead purchase battery cells which we can then package
into modules of varying sizes. We are entitled to volume purchasing discounts on battery modules and cells we purchase under the agreement and pricing terms have been established through 2013. A123
provides us with a 48-month warranty period on products it supplies to us, which can be extended for an additional two year period of more limited warranty coverage. The agreement does not
otherwise have a stated term. A123 has a right of first refusal under the agreement to supply us with certain annual volume requirements and has committed to supply us with a specified minimum number
of battery modules or cells determined based on rolling 12-month forecasts.
Avia Ashok Leyland Motors S.R.O.
Avia supplies the chassis and cab on which our Smith Newton platform is based. We purchase the chassis and cab and related components
for the Smith Newton exclusively from Avia under a supply agreement we entered into in October 2010 that covers the United States, Canada and Mexico. We purchase the chassis and cab for Smith Newton
vehicles produced in the United Kingdom from Avia under purchase orders. The supply agreement has an initial five-year term, which may be extended for an additional five years upon mutual
agreement of the parties. Under the supply agreement, Avia granted us the exclusive right to sell and market Avia's products within the electric vehicle market in the United States, Canada and Mexico,
subject to minimum purchase requirements. It is likely that we will not meet the minimum purchase requirements for 2011, and, as a result, Avia will become a non-exclusive supplier in
2012.
See
"Risk Factors—Our business, prospects, financial condition and operating results could be adversely affected if we lose our
exclusive rights to Avia chassis and cabs in North America." Avia also has granted us the right to assemble chassis in the United States for use with Avia's cab. If we exercise this right, Avia will
work with us to provide us the rights to the
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and design technology required for production. Pricing under the agreement is established annually and our engineering and procurement departments work closely to reduce the
manufacturing and assembly costs of Avia's products. Additionally, we act as Avia's exclusive master spare-parts and service parts distributor for electric vehicle parts to our customers in the United
States, Canada and Mexico. We have branding rights over all products purchased from Avia for use in the electric vehicle market in the United States, Canada and Mexico. Avia provides us with an
eight-year anti-corrosion warranty on the cabs, a two-year warranty on axles and a one-year warranty on all other parts supplied to us, subject, in the
case of parts supplied to us, to certain exceptions for ordinary wear and tear.
Ford Motor Company
Ford supplies the Transit vehicles on which our Smith Edison platform is based. Our purchases of Ford Transit vehicles are governed by
Ford's limited fleet special terms and conditions. The current terms and conditions under which we purchase Ford vehicles are effective through December 31, 2011 and we anticipate entering into
a new set of terms and conditions with Ford for 2012 prior to the end of 2011. We are entitled to volume pricing discounts for vehicles we purchase from Ford. Vehicles we purchase from Ford benefit
from a Ford-provided three year / 100,000 mile bumper-to-bumper warranty.
Impact Clean Power Technology S.A.
We developed our Smith Power technology in collaboration with CPTS. In September 2010, we entered into a development, supply and
license agreement with CPTS under which CPTS granted us an exclusive, non-transferable, sublicensable (to subcontractors or vendors that manufacture, fabricate or supply components or
parts to us) license to the technology and know-how related to the battery management system and battery pack assembly that comprises Smith Power for use in commercial electric vehicles in
the United States, Canada and Mexico. The agreement has an initial term of ten years and we have the option to extend the term for an unlimited number of additional two-year terms,
provided we and CPTS agree on a royalty structure for such additional two-year terms. Subject to CPTS's agreement, we have the ability to expand the scope of the license to cover
additional territories. This license allows us to develop, manufacture, improve, use and sell battery pack assemblies and management systems, and includes rights in related hardware and software. CPTS
currently manufactures our battery management system and assemblies, although we have the right under the development, supply and license agreement to assume control of manufacturing, either by
manufacturing these components ourselves or by shifting production to third party contract manufacturers. We are required to begin manufacturing battery modules for which the design is licensed to us
by CPTS within 24 months of the date of the agreement, or September 30, 2012, unless our failure to do so is a result of CPTS's failure to perform under the agreement. The agreement may be
terminated by either party upon a material breach by the other. We pay CPTS royalties on the products manufactured by or on our behalf under the license and also will pay fees through September 2012
for technical support and engineering services in connection with manufacturing. In November 2011, we also granted CPTS an option to purchase 50,000 shares of our common stock. CPTS is prohibited from
selling the products supplied under the agreement for use in commercial electric vehicles within the territory covered by the agreement, which initially is the United States, Canada and Mexico. CPTS
is permitted to sell such products outside of such field of use and territory. We have branding rights over all products created under the license agreement that are sold in United States, Canada and
Mexico. CPTS does not provide us warranty coverage for the products it supplies to us.
Magnetic Systems Technology Limited
MagTec began supplying us with powertrain components for the Smith Newton in May 2011 and Smith Europe entered into a license and
manufacturing agreement with MagTec in November 2011. The agreement has an initial ten-year term, which continues thereafter unless terminated by either us
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or
MagTec on at least 12 months' notice. Under the agreement, MagTec granted us an exclusive worldwide license, with limited sublicensing rights, to manufacture and use its permanent magnet
traction motor, gearbox unit and power controller, each of which are integral components of Smith Drive. MagTec initially is manufacturing the motor, gearbox and controller for us, although we have
the right under the license agreement to assume control of manufacturing, either by manufacturing these components ourselves or by shifting production to third party contract manufacturers. We have
the right to sublicense the rights granted to us under the agreement to subcontractors in the United States, Malaysia or the European Union, subject to certain exceptions, and in other territories
with MagTec's written consent. We anticipate shifting production of these components to a contract manufacturer by the first half of 2012. Once we assume control of manufacturing, we will pay MagTec a
royalty based on the number of Smith Drive systems manufactured using the licensed technology. MagTec warrants the products it manufactures and supplies to us against design and manufacturing defects
and warrants the products we manufacture using MagTec's design against design defects for 12 months from the product's first use, subject to a maximum warranty period of 18 months from
the date on which the product is delivered to us. We agreed to grant MagTec an option to purchase 30,000 shares of our common stock in connection with our entry into the license and manufacturing
agreement. MagTec granted us a right of first refusal in connection with any sale of a controlling interest in its stock or substantially all of business to a competitor of ours, subject, in each
case, to an existing right of first refusal previously granted by MagTec to a third party that is not a competitor of ours.
Sensor-Technik UK Ltd.
Sensor-Technik UK Ltd., or Sensor-Technik, developed, based on specifications supplied by us, the technology and supplies the
hardware components for our Smith Link technology. In January 2011, we entered into a development, supply and license agreement with Sensor-Technik under which we own the worldwide rights to all
intellectual property and know-how related to the hardware components and software supplied by Sensor-Technik. We granted Sensor-Technik the right to manufacture and sell the hardware
components and software to customers outside of the commercial electric vehicle market and outside of the United States. The agreement has a perpetual term and permits us, upon 90 days' written
notice to Sensor-Technik, to manufacture the hardware components and software covered by the agreement.
Key suppliers without supply agreements
BRUSA Electronik AG
BRUSA Electronik AG, or BRUSA, supplies chargers for use in the Smith Edison. We have not entered into a long-term contract
with BRUSA, but purchase these components through purchase orders on an as needed basis. BRUSA provides a 24-month warranty on the components it supplies to us.
EDN Group S.r.l.
EDN supplies the chargers used in the Smith Newton. We have not entered into a long-term contract with EDN, but we purchase
these components through purchase orders on an as-needed basis. EDN provides a 24-month warranty on the chargers it supplies to us.
Enova Systems Inc.
Enova supplies us with certain powertrain components that we use in the Smith Newton and Smith Edison. We have not entered into a
long-term contract with Enova, but purchase these components through purchase orders on an as needed basis. Enova provides a one-year warranty on the components it supplies to
us.
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StormMQ Limited
StormMQ developed the message queuing software that allows for the encryption and decryption of the data collected and transmitted by
our Smith Link technology. We have not entered into a definitive contract with StormMQ for the use of this software.
Valence Technology, Inc.
Valence currently supplies lithium-ion batteries and battery management systems used in the Smith Newton and Smith Edison.
Prior to our entry into the A123 product sales agreement discussed above, we purchased all of the battery systems used in our vehicles from Valence. We order battery modules from Valence through
purchase orders on an as-needed basis. Valence provides a two year or five year warranty, depending on battery system, on the products we purchase from it.
OUR CUSTOMERS
Our primary customers are industry-leading companies and government entities that operate substantial, depot-based,
medium-duty commercial vehicle fleets in the food & beverage, utility, telecommunications, retail, grocery, parcel and postal delivery, bus, logistics, short haul, facilities
management, airport operations and military and government sectors. Our customers include Frito-Lay, Coca-Cola, Staples, Sainsbury's, FedEx, TNT Express, DHL, Dairy Crest
Group PLC and the U.S. Army, Navy and Marine Corps. We believe that our customers have the corporate or public commitment and resources to support and sustain the development of the commercial
electric vehicle industry.
A
significant portion of our revenue is generated from a limited number of customers. Staples, Inc. and Dairy Crest Group PLC accounted for 16% and 15%, respectively, and
together accounted for approximately 31%, of our combined revenue for 2010. Frito-Lay accounted for approximately 56% of our consolidated revenue for the six months ended June 30,
2011.
We
continue to focus on increasing sales to our existing customers and also are working to attract customers in new market segments, such as postal delivery and the public sector, and in
the sectors in
which we already have customers. As a result of this focus, as of October 31, 2011 we have an order backlog of 120 vehicles, representing vehicle revenue of $15.7 million, and have
allocated nearly all of our estimated 540 production slots through July 2012. We expect that our number of available production slots will increase as we transition our supply chain, which will allow
us to ramp our production and increase our production capacity. We believe that substantially all of the 120 orders included in our order backlog will not be completed by the end of 2011. We include
in our order backlog vehicles yet to be produced that are subject to binding purchase agreements or written purchase orders we have received. Our order backlog excludes vehicles in inventory awaiting
additional modifications or delivery to the end customer. We generally manage our production schedule on a rolling six-month forward basis and allocate production slots based on our
receipt of binding purchase agreements and purchase orders as well as customers' ordering forecasts. Our allocation of production slots based on customers' ordering forecasts does not represent a
guarantee that those customers will place orders, that customers will not alter their forecasted delivery dates when placing orders or that orders made will not be cancelled. Nevertheless, we believe
that closely monitoring our projected production schedule allows us to better manage our business, including our inventory levels. Although the backlog of unfilled orders is one of many indicators of
market demand, other factors such as changes in production rates, internal and supplier available capacity, new vehicle introductions and competitive pricing actions may affect
point-in-time comparisons.
SALES, MARKETING AND DISTRIBUTION
We primarily market and sell our commercial electric vehicles in the United States and United Kingdom through a direct sales force. We
also have limited distribution arrangements with third parties
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the Faroe Islands, France, Greenland, Hong Kong, Iceland, Ireland and Macau. We also have worked with, and intend to continue working with, with key vehicle up-fitters to jointly market
our commercial electric vehicles, allowing us to leverage their sales forces, customer relationships and credibility in a market segment. Furthermore, we have retained a third party public relations
firm to help us increase awareness of our company and our vehicles.
We
offer a differentiated approach to commercial vehicle sales and service that departs from traditional truck sales and service models. Our approach involves a comprehensive plan for
the pilot and roll-out of our electric vehicles, as well as the ongoing replacement of existing commercial vehicles with our electric vehicles, that is tailored to the individual needs of
our customers. As a part of this approach, we offer guidance to our customers regarding how to most effectively use and operate their electric vehicles and on integrating electric vehicles into their
existing fleets or transitioning to all-electric vehicle operations. This plan includes the development of a multi-year purchasing forecast to help the customer systematically
integrate our vehicles into their fleets, as well as analytics that provide the expected economic and environmental impact of fleet conversion. We believe that our strategy of targeting
industry-leading companies and providing
them with an individualized sales and service solution has elevated our public profile, enhanced the credibility of our vehicles in the marketplace and made our customers advocates of our sales
approach and our vehicles, all of which enhances our ability to sell vehicles to new customers.
As
a part of our sales strategy, we separately present to our customers the base vehicle price and the battery system price. We believe that, in most cases, our base vehicle price is
competitive with or a slight premium to the price of a diesel-fueled vehicle with a comparable GVW. Our approach to pricing allows customers to compare the relative merits of a diesel truck's low cost
energy storage system (the fuel tank) and more expensive and volatile energy cost (the per gallon price of diesel fuel) with our vehicle's higher cost energy storage system (the battery) and lower and
more predictable energy cost (the per kilowatt hour price of electricity). We believe these comparisons make our vehicles more attractive to customers than traditional diesel options, particularly
during periods of rising fuel prices.
Currently,
our marketing and sales personnel are located in our Kansas City, Missouri headquarters and our facility outside of Newcastle, England. We intend to expand our marketing and
sales force as we open our sales, service and assembly facilities. Each facility will have a team of dedicated marketing and sales employees with responsibility for the geographic region in which the
facility is located. As a result, we believe we can efficiently and cost-effectively build out our marketing and sales network.
We
focus our marketing efforts on increasing brand awareness, generating demand for our vehicles, communicating product advantages and generating qualified leads for our sales force. We
rely on a variety of marketing vehicles, including participation in industry conferences and trade shows, public relations, industry research and our collaborative relationships with our business
partners to share our technical message with customers.
COMPETITION
The medium-duty commercial vehicle market is highly competitive and we expect it to become even more so in the future as
additional companies launch competing vehicle offerings. The medium-duty electric vehicle market, however, is less developed and competitive. In the broader medium-duty
commercial vehicle market, we compete with small to large global corporations that provide medium-duty commercial vehicles powered by internal combustion engines, including Ford, PACCAR,
Navistar, Hino, Fuso, Volvo, and Isuzu Motors. In the medium-duty commercial electric vehicle market, we compete with companies that produce all-electric commercial trucks or
vehicles powered by other alternative energy technologies, such as natural gas and hybrid technologies. These competitors include Ford, which, in partnership with Azure Dynamics, produces the Ford
Transit Connect EV®; Navistar, which produces the Navistar eStar®; Freightliner, which produces the
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MT E-CELL;
Odyne Systems, which produces plug-in hybrid heavy- and medium-duty trucks; ZeroTruck, which produces an all-electric
medium-duty truck; and Electric Vehicles International, which produces an all-electric walk-in van and light- and medium-duty commercial electric
trucks.
We
believe that the primary competitive factors within the medium-duty commercial vehicle market are:
•
the difference in the initial purchase prices of electric vehicles and comparable vehicles powered by internal combustion
engines, both including and excluding the impact of government and other subsidies and incentives designed to promote the purchase of electric vehicles;
•
the total cost of vehicle ownership over its expected life, which includes the initial purchase price and ongoing
operational and maintenance costs;
•
vehicle quality, performance and safety;
•
government regulations and economic incentives promoting fuel efficiency and alternate forms of energy;
•
the quality and availability of service for the vehicle, including the availability of replacement parts; and
•
for electric vehicles, the range over which they may be driven on a single battery charge.
GOVERNMENTAL PROGRAMS AND INCENTIVES
We believe that the availability of government subsidies and incentives currently is an important factor considered by our customers
when purchasing our vehicles, and that our growth depends in part on the availability and amounts of these subsidies and incentives. Over time, we believe that the importance of the availability of
government subsidies and incentives will decrease, as we continue to reduce the upfront cost of our vehicles. In order to help ensure that we and our customers benefit from available subsidies and
incentive programs in both the United States and in Europe, we have incentive specialists that work directly with our sales team and our customers on these issues.
U.S. programs and incentives
Smith Electric Vehicles Medium-Duty Electric Vehicle Demonstration Project
In August 2009, the DOE awarded us a $10.0 million grant under the DOE's Transportation Electrification Grant Program in order
to fund a portion of the EV Demonstration Project. This grant, which was increased to $32.0 million in April 2010, is comprised of two parts: a development reimbursement grant and a customer
incentive grant.
Under
the development reimbursement grant, we are eligible for reimbursement of one-third, or approximately $4.0 million, of the qualifying direct costs, indirect
costs, and capital expenditures we incur related to the development of electric vehicle technology. The customer participation grant makes available to us up to $28.0 million of funds from the
DOE that we pass through to our customers. The total cost of the EV Demonstration Project is approximately $68.0 million, and we are responsible for funding the $36.0 million not covered
by the DOE grant by November 30, 2014, which is the expiration date for the project. We satisfy the majority of our $36.0 million funding responsibility with the proceeds of sales of
vehicles that participate in the project. In addition, we are required to deliver 510 vehicles under this program by September 30, 2013. If we are unable to fund our share of the project costs,
we will not receive all of the funds that are available to us and our customers and we could be responsible for reimbursing the DOE for amounts funded by it in excess of its agreed upon share of
project costs.
In
addition, if we fail to place in service the required 510 vehicles by September 30, 2013, we will be unable to use the full amount available to us under the program.
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As
of September 30, 2011, $17.3 million of the $32.0 million remained available for us and our customers under the grant. As of such date, we have received
$1.3 million and $13.4 million in development reimbursements and customer incentives, respectively, and have no outstanding unpaid requests for customer incentives, under the grant.
The
purpose of the customer participation incentive grant is to capture performance data from an all-electric vehicle fleet of at least 500 vehicles that is based on our
Newton platform, which data can be used to accelerate production and reduce the costs of, enhance the technology related to, and help procure early acceptance of all-electric vehicle
fleets in the U.S. commercial vehicle marketplace. This data is collected using our Smith Link technology, which is installed in all of our vehicles. Under terms of the grant, participating vehicles
will be located and
operated in varying geographic and climatic regions and will include a diverse range of applications. For example, participating vehicles will include flatbed trucks, trucks with a cargo box, electric
boom trucks for utility work with ancillary power options, and refrigerated trucks with a cooled compartment for the food service industry. If a customer chooses to have a vehicle included in the
project, the customer and we enter into a program participation agreement that designates the term of the vehicle's inclusion in the project, the obligations of the customer under the project and the
amount that the customer will be compensated for participating in the project. Customers generally receive payment of $47,500 for participating in the program for a two year period and $71,000 for
participating in the program for a three year period.
The
Defense Contract Audit Agency, or DCAA, is auditing companies who have received funding from the DOE, for DOE. A DCAA audit of us, completed in October 2010, revealed significant
deficiencies that are considered to be material weaknesses in our accounting system for accumulating and billing costs under government contracts or financial assistance agreements, including our
process for submitting reimbursement claims, our timing for submitting rebates to our customers and our calculation of indirect costs to be reimbursed by the DOE. The DCAA audit report recommended
that reimbursement of expenditures for fixed assets, direct labor and overhead be discontinued under the project until we remedy these issues. In January 2011, we responded to the DOE regarding the
DCAA audit findings. Based on this response, the DOE confirmed in July 2011 that it would resume reimbursements for qualified fixed asset expenditures and direct labor costs incurred by us in
connection with the EV Demonstration Project. We have submitted additional requested information to the DOE and are awaiting a decision on whether the DOE will resume reimbursement of qualified
indirect costs and overhead costs. The DOE has continued to fund our customer participation payments throughout the duration of the EV Demonstration Project. If the DCAA concludes that our remedial
steps taken in response to the current DCAA audit are insufficient, or a future DCAA audit reflects that we continue to have material weaknesses in our accounting system for accumulating and billing
costs under government contracts or financial assistance agreements, the DOE could terminate the EV Demonstration Project and we and our customers would lose access to the remaining
$17.3 million of available funding under the project.
The
grant agreement that governs our participation in the EV Demonstration Project provides that, subject to certain conditions, we may elect to retain title to any inventions conceived
of or first actually reduced to practice under or during the performance of the agreement. We must, however, grant the U.S. federal government a paid-up, nonexclusive, irrevocable,
worldwide license to use (or to authorize third parties to use on behalf of the federal government) such inventions. We do not believe that we are obligated, at this time, to grant the federal
government a license to any inventions that are material to our business.
We
are required to provide the DOE with certain data we collect in connection with the EV Demonstration Project, periodic progress, status, financial, scientific, technical and other
reports with regard to the project and semi-annual technical briefings that summarize the status, technical results and near-term plans for the project. The grant agreement
that governs our participation in the EV Demonstration Project provides that, while we retain the right to use and distribute all data first
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produced
in the performance of the grant agreement or delivered to the DOE under the agreement, the federal government has unlimited rights in all such data. The federal government's unlimited rights
include the right to use, disclose, reproduce, prepare derivative works, and distribute copies to the public, in any manner and for any purpose, and to have or permit others to do so.
Finally,
we must provide DOE personnel with reasonable access to our facilities, personnel and books and records in connection with DOE audits of us.
California Hybrid Truck and Bus Voucher Incentive Program
The Smith Newton, in nine different combinations of wheel bases and vehicle weights, is among the vehicles eligible for purchase during
2011 under HVIP. HVIP is a partnership between the California Air Resources Board, or CARB, and CALSTART, the purpose of which is to help speed the early market introduction of clean,
low-carbon hybrid trucks. Under HVIP, dealers and fleet operators may request vouchers from HVIP on a first-come first-serve basis, up to the funding amount available for that
year, to reduce the cost of purchasing hybrid and zero emission medium- and heavy-duty trucks and buses. HVIP has $18.0 million in funding available to distribute through vouchers for 2011.
HVIP vouchers range in amount from $10,000 to $40,000, depending on the gross vehicle weight of the purchased vehicle. The Smith Newton vehicles that are eligible for purchase under HVIP all are
eligible for $20,000 vouchers.
HVIP
funds the purchase of only fully commercialized hybrid and zero emission trucks and buses. Vehicles still in the demonstration or evaluation stage are not eligible for inclusion in
HVIP. Vehicle manufacturers must apply to have their hybrid and zero emissions trucks and busses included in HVIP's voucher program. Once a make and model is included in the program, the manufacturer
is not required to submit a full application for the succeeding year's program unless the vehicle has been modified.
Clean Cities
Our customers have been reimbursed approximately $1.7 million in the aggregate for purchasing our commercial electric vehicles
under Clean Cities, a program administered by the DOE's Office of Efficiency and Renewable Energy, Vehicle Technology Program. According to the DOE, the mission of Clean Cities is to advance the
energy, economic, and environmental security of the United States by supporting local decisions to adopt practices that reduce the use of petroleum in the transportation sector. Clean Cities is a
government-industry partnership. Under the program, public and private stakeholders from businesses, city and state governments, the automotive industry, fuel providers, and community organizations
form coalitions throughout the country, which then work with the DOE to establish a plan for reducing petroleum consumption in their respective geographic areas.
We
have been in the past and are currently involved in Clean Cities coalitions in New York, Texas, Missouri and Ohio, which have taken advantage of federal funding for alternative fuel
vehicles to create incentives for purchasing electric vehicles, including our commercial electric vehicles. These incentives typically will offset 50% of the cost difference between our commercial
electric vehicles and standard vehicles, such as diesel trucks. These incentives have resulted in savings to our customers of between $64,000 to $94,000 per vehicle.
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Diesel Emissions Reduction Act funding
The National Clean Diesel Funding Assistance Program, which is administered by the EPA National Clean Diesel Campaign, provides funding
under the Diesel Emissions Reduction Act for projects that seek to reduce emissions from existing diesel engines. Eligible applicants include U.S. regional, state and local agencies that have
jurisdiction over transportation or air quality and certain nonprofit institutions that provide pollution reduction or educational services to owners and operators of diesel fleets or that have as
their principal purpose the promotion of transportation or air quality. Among the eligible uses of funding under this program are the purchase of buses and medium and heavy-duty trucks that result in
reduced diesel emissions. Approximately $32.0 million of funding was available to be awarded under this program for 2011. We assist our customers in the competitive application process for
awards under this program. If a customer's application for a grant is approved, the grant would cover up to 25% of the cost of the customer's vehicle purchase from us.
Congestion Mitigation and Air Quality Improvement Program
The Congestion Mitigation and Air Quality Improvement program, or CMAQ, which is jointly administered by the DOT Federal Highway
Administration and Federal Transit Administration, provides funding to states to support surface transportation projects and other related efforts that contribute air quality improvements and provide
congestion relief. CMAQ funding is allocated to the states annually based on a statutory formula that is based on population and air quality classification as designated by the Environmental
Protection Agency, or EPA. Each state's transportation department then is responsible for distributing the funds. State transportation departments may spend CMAQ funds on projects that reduce ozone
precursors, and at least 16 states have used CMAQ funds for alternative fuel vehicle projects (such as purchasing electric or hybrid vehicles). In June 2010, in partnership with Brown Cargo Van, Dole
Refrigerating Co. and Coulomb Technologies, we delivered our first medium-duty, refrigerated, all-electric delivery truck to a company in New York City under a project
funded by CMAQ. We have a goal of developing a turnkey project that would allow for the easy roll out of a program similar to HVIP that includes reimbursement of $20,000 of the cost of our vehicles
with CMAQ funds.
Other state incentives
A number of states and municipalities in the United States, as well as certain private enterprises, offer incentive programs to
encourage the adoption of alternative fuel vehicles, including tax exemptions, tax credits, exemptions and special privileges. For example, New Jersey and Connecticut exempt the purchase of electric
vehicles from state sales tax. Other states, including Colorado, New York, Georgia and Virginia, provide for substantial state tax credits for the purchase of electric vehicles.
E.U. programs and incentives
Low Carbon Vehicle Procurement Programme
The Low Carbon Vehicle Procurement Programme, or LCVPP, was established by the United Kingdom's Department for Transport, and is
administered by its delivery partner, the Centre of Excellence for Low Carbon and Fuel Cell Technologies, in order to accelerate the introduction of lower carbon technologies into the U.K. vehicle
market, with the ultimate objective of reducing overall carbon emissions from vehicle fleets. The LCVPP is administered in two phases, the first of which is ongoing with a target completion date of
November 2013. All vehicles procured under Phase 1 have been delivered and are now subject to a period of vehicle performance monitoring. Purchases of vehicles under Phase 1 of the
program were restricted to public sector organizations and included the City of
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London
Corporation, Transport for London, the Metropolitan Police and the Environment Agency, as well as several county councils.
The
Department of Transport provided £20.0 million of funding for Phase 1 of the program between April 2008 and February 2011. Under the program, public sector
organizations that purchased electric or low carbon producing vans from participating manufacturers received a rebate from the U.K. government to cover the difference in price between the electric or
low carbon producing van and an equivalent sized conventional diesel van. The average rebate for the purchase of our vehicles was £50,000 per vehicle.
Phase 1
of the program was intended to allow public sector bodies to test electric and low carbon producing vehicles in real-world conditions while simultaneously
providing an opportunity for manufacturers to demonstrate the performance of their vehicles in high-profile fleets. We were one of four suppliers of electric vehicles under Phase 1,
supplying 43 Edison vans out of a total 197 electric and hybrid vehicles. The U.K. Department of Transport is evaluating whether to proceed with Phase 2 of the program, which would make
available additional funds to encourage the adoption of electric and low carbon producing vehicles across the public sector.
Technology Strategy Board initiatives
The TSB, which was established in 2007 and is sponsored by the U.K. Department for Business, Innovation and Skills, is the United
Kingdom's national innovation agency. The TSB's purpose is to accelerate economic growth by stimulating and supporting
business-led innovation. The TSB runs competitions that are designed to accelerate innovation in specific sectors and provides partial funding for successful applicants. Generally, these
competitions require several organizations to combine their expertise and collaborate to further innovation and development in particular sectors. We participate or have participated in three TSB
competitions: DESERVE, EVADINE and E VAN.
Under
the collaboration agreements governing our participation in the three TSB programs, we own all rights to the intellectual property that we develop in the course of the project and
jointly own the rights to any intellectual property developed jointly with another project participant. Together with the other project participants, we jointly own the information,
know-how, results, inventions, software and intellectual property identified in the course of the project.
Project DESERVE
We participated in Project DESERVE, which was administered under the Technology Programme "Ultra Low Carbon Vehicle Demonstrator"
Competition for Funding, between August 1, 2008 and February 1, 2011 in collaboration with three other successful project applicants. The TSB provided total funding to the project of
£384,166, which focused on the development of high energy batteries and high power supercapacitors for electric range van evaluation. We were the lead participant in the project and
received individual funding of £64,000 through September 30, 2011.
Project EVADINE
We have participated in Project EVADINE, which is administered under the Technology Programme "Ultra Low Carbon Vehicle Demonstrator"
Competition for Funding, since June 1, 2009 in collaboration with four other successful project applicants. The project runs for five years until May 31, 2014 and focuses on accelerating
the development of electric vehicles in northeast England. The TSB will provide aggregate total funding to the project of £5.4 million, of which we will receive approximately
£179,000 in order to develop an electric version of the Ford Connect Van and to produce an executive mini-bus based on the Ford Transit vehicle platform. We have received
approximately £127,000 under this project through September 30, 2011.
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Project E VAN
We have participated in Project E VAN, which is administered under the Technology Programme BH004H./.400087 Competition for Funding, as
lead participant since October 1, 2009 in collaboration with four other successful applicants. The project runs for three years until September 30, 2012 and focuses on the development of
an ultra-high efficiency electrically powered vehicle system to be applied and demonstrated on a medium sized commercial vehicle. In particular, we aim to demonstrate the benefits of
permanent magnet traction motors on larger vehicle platforms. The TSB will provide aggregate total funding to the project of £1.4 million, of which we expect to receive
approximately £568,000. We have received total funding of approximately £219,000 under this project through September 30, 2011.
GOVERNMENT REGULATION
Our electric vehicles are designed to comply with a significant number of governmental regulations and industry standards, some of
which are evolving as new technologies are deployed. Government regulations regarding the manufacture, sale and implementation of products and systems similar to our electric vehicles are subject to
future change. We cannot predict what impact, if any, such changes may have upon our business. We believe that our vehicles are in conformity with all applicable laws in all relevant jurisdictions.
Emission and fuel economy standards
Government regulation related to climate change is under consideration at the U.S. federal and state levels. The EPA and the National
Highway Traffic Safety Administration, or NHTSA, issued a final rule for greenhouse gas emissions and fuel economy requirements for trucks and heavy-duty engines on August 9, 2011,
which will have an initial phase in starting with model year 2014 and a final phase in occurring in model year 2017. NHTSA standards for model year 2014 and 2015 will be voluntary, while mandatory
standards will first come into effect in 2016.
The
rule provides emission standards for CO2 and fuel consumption standards for three main categories of vehicles: (i) combination tractors, (ii) heavy-duty
pickup trucks and vans and (iii) vocational vehicles. We believe that the Smith Newton and Smith Edison would be considered "vocational vehicles" under the rule. According to the EPA and NHTSA,
vocational vehicles consist of a wide variety of truck and bus types, including delivery, refuse, utility, dump, cement, transit bus, shuttle bus, school bus, emergency vehicles, motor homes and tow
trucks, and are characterized by a complex build process, with an incomplete chassis often built with an engine and transmission purchased from other manufacturers, then sold to a body manufacturer.
The
EPA and NHTSA rule also establishes multiple flexibility and incentive programs for manufacturers of alternatively fueled vehicles, such as the Smith Newton and Smith Edison,
including an engine averaging, banking and trading, or ABT, program, a vehicle ABT program and additional credit programs for early adoption of standards or deployment of advanced or innovative
technologies. The ABT programs will allow for emission and/or fuel consumption credits to be averaged, banked or traded within defined groupings of the regulatory subcategories. The additional credit
programs will allow manufacturers of engines and vehicles to be eligible to generate credits if they demonstrate improvements in excess of the standards established in the rule prior to the model year
the standards become effective or if they introduce advanced or innovative technology engines or vehicles.
The
Clean Air Act requires that we obtain a Certificate of Conformity issued by the EPA and a California Executive Order issued by CARB with respect to emissions for our vehicles. The
Certificate of Conformity is required for vehicles sold in states covered by the Clean Air Act's standards and the Executive Order is required for vehicles sold in states that have sought and received
a waiver from the EPA to utilize California standards. The California standards for emissions control for certain regulated
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pollutants
for new vehicles and engines sold in California are set by CARB. States that have adopted the California standards as approved by EPA also recognize the Executive Order for sales of
vehicles.
Manufacturers
who sell vehicles in states covered by federal requirements under the Clean Air Act without a Certificate of Conformity may be subject to penalties of up to $37,500 per
violation and be required to recall and remedy any vehicles sold with emissions in excess of Clean Air Act standards. In 2009, we received approval from CARB to sell the Smith Newton in California
based on our own emissions tests. We were not granted a Certificate of Conformity because CARB had not established a formal certification procedure for heavy-duty, all-electric vehicles.
The
E.U. Directive on the Promotion of Clean Energy Efficient Road Vehicles requires local, regional and national public authorities to take into account operational lifetime energy and
environmental impacts when purchasing on-road vehicles. When purchasing vehicles, public authorities must consider the vehicle's energy consumption, carbon dioxide and nitrogen oxide
emissions,
non-methane hydrocarbons and particular matter emissions, among other environmental impacts.
Vehicle safety and testing
The National Traffic and Motor Vehicle Safety Act of 1966, or the Safety Act, regulates motor vehicles and motor vehicle equipment in
the United States in two primary ways. First, the Safety Act prohibits the sale in the United States of any new vehicle or equipment that does not conform to applicable motor vehicle safety standards
established by NHTSA. Meeting or exceeding many safety standards is costly, in part because the standards tend to conflict with the need to reduce vehicle weight in order to meet emissions and fuel
economy standards. Second, the Safety Act requires that defects related to motor vehicle safety be remedied through safety recall campaigns. A manufacturer is obligated to recall vehicles if it
determines that the vehicles do not comply with a safety standard. Should we or NHTSA determine that either a safety defect or noncompliance exists with respect to any of our vehicles, the cost of
such recall campaigns could be substantial.
The
E.U. Regulation on the Safety of Motor Vehicles sets safety standards for motor vehicles, such as electronic stability control requirements and braking standards, and imposes noise
emission limit values and wet grip requirements for tires. A European Commission Regulation of April 2011 makes mandatory in Europe the safety requirements for battery-powered electric vehicles of
UNECE Regulation 100 and its amendments. European standardization bodies also are expected to adopt harmonized standards on the charging of electric vehicles, which could result in additional
manufacturing and design costs for electric vehicles marketed in Europe. These requirements and further amendments may restrict the marketing of electric vehicles in Europe.
Battery safety and testing
Our battery pack conforms to mandatory regulations that govern transport of "dangerous goods," which includes lithium-ion
batteries, that may present a risk in transportation. The governing regulations, which are issued by PHMSA, are based on the UN Recommendations on the Safe Transport of Dangerous Goods Model
Regulations, and related UN Manual Tests and Criteria. The regulations vary by mode of transportation when these items are shipped such as by ocean vessel, rail, truck or air.
Our
battery module suppliers have completed the applicable transportation tests for our prototype and production battery packs demonstrating our compliance with the UN Manual of Tests
and Criteria, including:
•
altitude simulation, which involves simulating air transport;
•
thermal cycling, which involves assessing cell and battery seal integrity;
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•
vibration, which involves simulating vibration during transport;
•
shock, which involves simulating possible impacts during transport;
•
external short circuit, which involves simulating an external short circuit; and
•
overcharge, which involves evaluating the ability of a rechargeable battery to withstand overcharging.
In
Europe, industrial batteries, including the lithium-ion batteries used in electric vehicles, are subject to the requirements of the E.U. Batteries Directive. This
Directive, among other things, bans batteries containing more than 0.0005% of mercury and requires manufacturers, including vehicle manufacturers, to pay and provide for the collection, treatment,
recycling, reuse and sound disposal of the batteries used in vehicles. We do not believe that the batteries we use in our U.K.-produced vehicles exceed the mercury threshold established under this
Directive. The inland transportation of batteries, including lithium-ion batteries, is subject to the requirements of Directive 2008/68 on the Inland Transport of Dangerous Goods, and E.U.
waste legislation also
imposes stringent restrictions on the handling, intra-E.U. shipment and export to third countries of waste batteries. These requirements may delay the introduction of advanced technology
vehicle batteries in Europe and impose significant costs on us. We are exploring arrangements with third parties to dispose of or otherwise recycle used battery packs. Currently, if a customer wishes
to return a battery pack from one of our vehicles, we return the battery pack to our supplier for disposal.
Our
European production activities, vehicles and parts marketed in the E.U., as well as those of our suppliers, also are subject to the registration, evaluation, authorization and
restrictions procedures of the E.U.'s REACH Regulation for chemicals.
Vehicle dealer and distribution regulation
Certain states' laws require motor vehicle manufacturers and dealers to be licensed in such states in order to conduct manufacturing
and sales activities. To date, we are registered as both a motor vehicle manufacturer and dealer in Missouri. We have not yet sought formal clarification of our ability to manufacture or sell our
vehicles in any other states.
We
have performed an analysis of the principal laws in the European Union relating to our current distribution model and our future decentralized production, sales and service model and
believe that we do now and will continue to comply with such laws; however, we have not performed a complete analysis in all foreign jurisdictions in which we may sell vehicles. Accordingly, there may
be laws in jurisdictions we have not yet entered or laws we are unaware of in jurisdictions we have entered that may restrict our business practices. Even for those jurisdictions we have analyzed, the
laws in this area can be complex, difficult to interpret and may change over time.
INTELLECTUAL PROPERTY
Our success depends in part on our ability to protect our core technology, to operate our business without infringing the intellectual
property rights of others and to prevent others from infringing our intellectual property rights. To protect our core technology, we rely primarily on trade secrets, including know-how,
and employee and third party nondisclosure and non-competition agreements. We also rely on intellectual property licenses, other contractual rights and common law rights to establish and
protect our proprietary rights in our technology. We do not own any patents and do not have any patent applications pending with the USPTO or applicable foreign patent filing offices. We have entered
into intellectual property licenses with third parties in order to obtain the intellectual property rights necessary to manufacture our vehicles, including for the battery management system and
battery pack used in our Smith Power
system and the powertrain that forms the basis of our Smith Drive system. See "—Key Suppliers" for a description of these license agreements.
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We
filed applications for trademark protection with the USPTO in July 2011 for the marks "Smith," "Smith Electric," "Smith Link," "Smith Drive," "Smith Power," "Newton" and "Edison," and
for the Smith Electric Vehicles logo in November 2011. In August and September 2011, we filed applications for international trademark registration under the Madrid Protocol and in Canada for the mark
"Smith". We are in the process of filing applications to register our marks in the European Union and other designated countries around the world.
The
grant agreement that governs our participation in the EV Demonstration Project provides that, subject to certain conditions, we may elect to retain title to any inventions conceived
of or first actually reduced to practice under or during the performance of the agreement. We must, however, grant the U.S. federal government a paid-up, nonexclusive, irrevocable,
worldwide license to use (or to authorize third parties to use on behalf of the federal government) such inventions. We do not believe that we are obligated, at this time, to grant the federal
government a license to any inventions that are material to our business.
We
are required to provide the DOE with certain data we collect in connection with the EV Demonstration Project, periodic progress, status, financial, scientific, technical and other
reports with regard to the project and semi-annual technical briefings that summarize the status, technical results and near-term plans for the project. The grant agreement
that governs our participation in the EV Demonstration Project provides that while we retain the right to use and distribute all data first produced in the performance of the grant agreement or
delivered to the DOE under the agreement, the federal government has unlimited rights in all such data. The federal government's unlimited rights include the right to use, disclose, reproduce, prepare
derivative works, and distribute copies to the public, in any manner and for any purpose, and to have or permit others to do so.
Under
the collaboration agreements governing our participation in the DESERVE, EVADINE and E VAN programs sponsored by the Technology Strategy Board, or TSB, we own all rights to the
intellectual property that we develop in the course of the project and jointly own the rights to any intellectual property developed jointly with another project participant. Together with the other
project participants, we jointly own the information, know-how, results, inventions, software and intellectual property identified in the course of the project. See
"—Governmental Programs and Incentives—E.U. programs and incentives—Technology Strategy Board initiatives" for more information about our participation in these
collaborations.
EMPLOYEES
As of September 30, 2011, we had 281 full-time employees, of which 80 were employed by Smith in the United States
and 201 were employed by Smith Europe. Seventy-six of our employees are engaged in production, 36 are engaged in research, development, design and engineering, 12 are engaged in sales and
marketing, 120 are engaged in service and 37 are engaged in general and administration. None of our U.S. employees are represented by labor unions or are covered by a collective bargaining agreement
with respect to their employment, while approximately 17% of our Smith Europe employees are represented by Unite the Union, a U.K. trade union. We have not experienced any work stoppages or strikes
and generally believe that our relationships with our unionized and non-unionized employees are good.
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The
following table sets forth the principal functions of our full-time employees as of September 30, 2011.
Principal Function
Smith
Smith Europe
Total
Production
25
51
76
Research, development, design and engineering
17
19
36
Sales and marketing
6
6
12
Service
13
107
120
General and administration
19
18
37
Total
80
201
281
PROPERTIES
Our corporate headquarters are located in Kansas City, Missouri. We currently lease or license facilities in Kansas City, Missouri and
in the United Kingdom that are used for production, technical, research and development, sales, service and administrative purposes. We currently own two of our facilities located in the United
Kingdom. We intend to add new facilities and expand our existing facilities as we add employees, increase our production and open our sales, service and assembly facilities. We believe that suitable
additional or alternative space will be available in the future on commercially reasonable terms to accommodate our foreseeable future expansion.
The
following table sets forth the location, approximate size and primary use of our principal owned, leased and licensed facilities:
Location
Approximate Size
(Building) in
Square Feet
Primary Use
Owned,
Leased or
Licensed
Lease/ License
Expiration Date
(if applicable)
Kansas City, Missouri
8,600
(1)
Administration and sales and marketing
Leased
May 31, 2012(1)
Kansas City, Missouri
400,000
(2)
Production; research, development, design and engineering; and service
Leased
September 30, 2012(3)
Washington, Tyne and Wear, England
250,000
(4)
Production; research, development, design and engineering; service; administration and sales and
marketing
Licensed
December 31, 2013
(1)
Square
footage shown reflects the size of the leased area, rather than the size of the office building. The initial term of this lease expired on
May 31, 2011. The lease provides for two one-year renewal terms that may be exercised at our option, the first of which we have exercised.
(2)
We
lease approximately 85,100 square feet of this facility from the Kansas City, Missouri government. We have a right of first refusal to lease
approximately 72,000 square feet of the remainder of the facility.
(3)
The
initial term of this lease expired on September 30, 2010. The lease provides for three one-year renewal terms that may be exercised
at our option, two of which we have exercised.
(4)
Smith
Europe licenses the right to use approximately 80,000 square feet of this facility from Tanfield. See "Relationships and Related Person
Transactions—Tanfield Agreements—Tanfield license agreement" for further information about this license agreement.
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LEGAL PROCEEDINGS
From time to time, we are subject to various claims arising in the ordinary course of business, including claims that our business
activities infringe on the intellectual property rights of third parties, and are party to legal proceedings that constitute ordinary, routine litigation incidental to our business. In our opinion,
the disposition of these claims and proceedings, after taking into account recorded accruals and our insurance coverage limits, to date has not had, and in the future will not have, a material effect
on our business, financial condition, operating results or cash flows.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information about our executive officers and directors as of November 8, 2011:
Name
Age
Position
Bryan L. Hansel
46
President, Chief Executive Officer, Chairman
Paul R. Geist
48
Chief Financial Officer
Robin J. Mackie
52
Chief Technology Officer and Senior Vice President, Director
Geoffrey E. Allison
43
Managing Director, Smith Europe
Angela Strand Boydston
43
Chief Marketing Officer
Ben Kevin Neal
51
Vice President of Human Relations and Administration
Jacques D. Schira
56
General Counsel
Francis H. Striker III
45
Vice President of Global Operations
John N. Bridge
69
Director
Robert J. Druten
64
Director
Darren Kell
43
Director
Thomas T. Stallkamp
65
Director
Bryan L. Hansel
has served as our President and Chief Executive Officer and as a director since our inception in January 2009.
Mr. Hansel was appointed Chairman of our board of directors in November 2011. Prior to joining us, from October 2004 to August 2008, Mr. Hansel served as the President and Chief
Executive Officer and as a director of Evo Medical Solutions, a manufacturer and distributor of home respiratory medical devices.
Mr. Hansel
was selected to serve on our board of directors because of his extensive knowledge of our operations, strategic plan and customers through his service as our President
and Chief Executive Officer and as one of our founding stockholders. We believe the experience Mr. Hansel gained through the executive positions he has held throughout his career make him an
essential member of our board of directors and a vital interface between our management and the board.
Paul R. Geist
has served as our Chief Financial Officer since November 2010. Prior to joining us, Mr. Geist was employed in
various finance roles by American Italian Pasta Company, or AIPC, from October 2004 to November 2010. From January 2008 through November 2010, Mr. Geist served as AIPC's Executive Vice
President and Chief Financial Officer. From October 2004 through January 2008, he served as AIPC's Vice President and Corporate Controller and he was named principal accounting officer in August 2006.
Previously, Mr. Geist held executive accounting and finance positions with Potbelly Sandwich Works, a privately-owned restaurant company, Westar Energy, Inc., a public electric utility,
Panera Bread Company, a public restaurant company and Houlihan's Restaurant Group, Inc., including serving as Chief Financial Officer for Westar Energy, Inc. and Houlihan's Restaurant
Group, Inc.
Robin J. Mackie
has served as our Chief Technology Officer and as a director since our inception in January 2009, and as our Senior
Vice President since November 2011. Mr. Mackie also has served as Smith Europe's Chief Technology Officer and Senior Vice President since November 2011. From
October 2005 to August 2008, Mr. Mackie served as the Director of Product Development of Evo Medical Solutions. Mr. Mackie currently serves as the Chairman of the Board of Governors of
Gateshead College in England.
Mr. Mackie
was selected to serve on our board of directors because of his operational, engineering and managerial experience, as well as his extensive knowledge of our operations
through his role as one of our initial officers and founding stockholders. We believe that Mr. Mackie's over 25 years of
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engineering
experience in the medical and automotive industries and over ten years of experience serving on the boards of directors of technology companies enables Mr. Mackie to provide
valuable guidance to our board of directors.
Geoffrey E. Allison
has served as the Managing Director of Smith Europe since we acquired the Smith UK business in January 2011.
Prior to joining us, Mr. Allison served as the Managing Director of the Smith UK Zero-Emission Vehicle Division from July 2008 through December 2010. Mr. Allison previously
served as Plant Manager of Tanfield's production site outside of Newcastle, England from July 2006 to July 2008. Mr. Allison served on Tanfield's board of directors from July 2008 to December
2010.
Angela Strand Boydston
has served as our Chief Marketing Officer since April 2011. Prior to joining us, Ms. Boydston worked for
Proteus Biomedical, a developer of medical and biotechnology devices, where she served as Vice President of Market Development from January 2009 to April 2011 and as Senior Director of Marketing from
August 2006 to December 2008.
Ben Kevin Neal
has served as our Vice President of Human Resources and Administration since February 2009. From January 1999 to June 2008,
Mr. Neal served as the Vice President, Human Resources for Farmland Foods, Inc., a global food manufacturer and distributor. Mr. Neal serves as a director of the Kansas
City & Vicinity Workforce Investment Board and the Kansas City International Airport Community Improvement District Board.
Jacques D. Schira
has served as our General Counsel since March 2009. From March 2006 to March 2009, Mr. Schira served as
General Counsel of Medical Industries America, Inc., a medical device manufacturer and distributor. In April 2008, Mr. Schira filed a personal bankruptcy petition, which was discharged
in February 2009.
Francis H. Striker III
has served as our Vice President of Global Operations since May 2011. From October 2007 to May 2011,
Mr. Striker served as the Vice President of Americas Operations and the Director of the Ottawa Multi-Assembly Unit of Cargotec Solutions, LLC, a provider of cargo handling
services and solutions. From May 2006 to October 2007, Mr. Striker served as the Director of Operations of United Rotary Brush Corporation, a manufacturer of road and runway rotary brooms and
engineered brush products.
John N. Bridge
has served as a director since August 2009. Dr. Bridge is also Chairman of Inspiredspaces Ltd and
Chairman of Integrated Bradford Ltd., companies that manage school building programs in the North East of England, and as a director of Tanfield. Since 2001, Dr. Bridge has provided
consulting services to various central and local governmental bodies. From June 2001 to March 2011, Dr. Bridge served as Chairman of Endeavour Plc, a private finance initiative company
in the healthcare sector. From October 2006 to June 2010, Dr. Bridge also served as Chairman of the Agriculture and Horticulture Development Board, an organization providing research and
development and knowledge transfer services to the agricultural and horticultural sectors in the United Kingdom. Dr. Bridge served as Chairman of Land Trust, an organization that develops land
for public use, from September 2004 to June 2010.
Dr. Bridge
was selected to serve on our board of directors because of his economics background and extensive experience in both the public and private sectors. We believe that
Dr. Bridge's focus on and experience with issues including change management, risk management and strategic planning contributes important perspective and expertise to our board.
Robert J. Druten
has served as a director since November 2011. Mr. Druten served as the Executive Vice President and Chief
Financial Officer of Hallmark Cards, Inc., or Hallmark, from 1994 until his retirement in August 2006. Mr. Druten previously served in various executive and corporate development roles
at Hallmark. Prior to joining Hallmark, Mr. Druten served in various corporate development and accounting roles at Pioneer Western Corporation, Kansas City Southern Industries
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and
Arthur Young & Co. Mr. Druten currently serves on the boards of directors of Alliance Holdings GP, LP, the managing general partner of Alliance
Holdings GP, LLC, which is indirectly engaged in the production and marketing of coal to utilities and industrial users, where he is a member of the audit and conflicts committees;
Kansas City Southern, a transportation company, where he is the audit committee chairman, finance committee chairman and a member of the nominating and governance committee; and Entertainment
Properties Trust, a real estate investment trust, where he is the chairman of the board and a member of the compensation, nominating and governance, and finance committees. Mr. Druten served as
a director of AIPC from December 2007 to July 2010.
Mr. Druten
was selected to serve on our board of directors because of his extensive experience as the principal financial officer and a board member of public companies, which led
to his expertise in public accounting, internal controls, financial reporting and the preparation of financial statements. Furthermore, as a member of the Entertainment Properties Trust board of
directors, Mr. Druten has helped guide a company through the registration process and its early stages as a public company. We believe that these experiences will enable Mr. Druten to
help guide our strategic direction as a public company and our audit committee's oversight of our financial reporting processes.
Darren Kell
has served as a director since August 2009. Mr. Kell has served as the Chief Executive Officer of Tanfield since
September 2006 and has served as a Tanfield director since December 2003. Mr. Kell had served as Tanfield's Business Development Director from 2003 to September 2006.
Mr. Kell
was selected to serve on our board of directors because he possesses 20 years of experience in senior management positions at sales and manufacturing companies,
during which he has developed expertise in business-to-business sales and marketing strategies, business generation and intellectual property development in connection with
commercial electric vehicles. We believe that Mr. Kell's expertise in these areas allows him to meaningfully contribute to the development and review of our strategic plans.
Thomas T. Stallkamp
has served as a director since November 2011. Since June 2004, Mr. Stallkamp has served as the founder
and a principal of Collaborative Management LLC, a private supply chain consulting firm. From June 2004 to December 2010, Mr. Stallkamp served as an industrial partner for Ripplewood
Holdings LLC, a private equity firm specializing in the automotive, financial, manufacturing and media sectors. Mr. Stallkamp has held numerous management, executive and board positions
with companies including MSX International, Inc., a global provider of technology-driven engineering, business and specialized staffing services; DaimlerChrysler Corporation, including as
president of DaimlerChrysler Corporation; and Ford Motor Company. Mr. Stallkamp currently serves on the board of trustees of EntrepreneurShares Series Trust, a registered investment company;
and the boards of directors of Baxter International, Inc., where he is a member of the audit and compensation committees; and BorgWarner, Inc., a developer of powertrain technologies,
where is a member of the audit committee.
Mr. Stallkamp
was selected to serve on our board of directors because he possesses more than 40 years of experience in the automotive industry in executive and management
roles for OEMs and auto manufacturers. Mr. Stallkamp's experience managing complex international organizations, including manufacturing operations and procurement and supply chain
logistics for Ford and Chrysler, provide him with the international perspective, industry insight, financial acumen and managerial expertise needed to help lead our board of directors.
BOARD COMPOSITION
Our board of directors currently consists of six members. Our by-laws permit our board of directors to establish by
resolution the authorized number of directors, and seven directors are currently authorized. The members of our board of directors were elected in compliance with the provisions of our amended and
restated voting and drag-along agreement. This agreement will
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terminate
upon the closing of this offering and there will be no further contractual obligations regarding the election of our directors. We are in the process of identifying additional independent
directors to join our board of directors.
As
of the closing of this offering, our certificate of incorporation will provide for a classified board of directors consisting of three classes of directors, as nearly equal in size as
is practicable. The members of each class will serve for staggered three-year terms, expiring at the first, second and third regularly-scheduled annual meetings of our stockholders
following the closing of this offering. Upon the closing of this offering, the members of the classes will be divided as follows:
•
the class I directors will be                    , and their term will expire at the annual
meeting of stockholders to
be held in 2012;
•
the class II directors will be                    , and their term will
expire at the annual meeting of stockholders to
be held in 2013; and
•
the class III directors will be                    , and their term will
expire at the annual meeting of stockholders
to be held in 2014.
Upon
expiration of the term of a class of directors, directors for that class will be elected for three-year terms at the annual meeting of stockholders in the year in which
that term expires. Each director will serve until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal. Our certificate of incorporation and
by-laws
provide that our directors may be removed only for cause by the affirmative vote of holders of at least a majority of the votes that all of our shareholders would be entitled to cast in an annual
election of directors. Any vacancy or on our board of directors, including a vacancy resulting from an increase in the authorized number of directors, may be filled only by the vote of a majority of
our directors then in office.
DIRECTOR INDEPENDENCE
Upon the completion of this offering, we expect that our common stock will be listed on The Nasdaq Global Market. Under
Rule 5605(b)(1) of the Nasdaq Stock Market, independent directors must comprise a majority of a listed company's board of directors within one year of listing. Additionally, Nasdaq rules
require that, subject to specified exceptions, each member of a listed company's audit, compensation and nominating and governance committees be independent. Audit committee members must also satisfy
the independence criteria set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Under Nasdaq Stock Market Rule 5605(a)(2), a
director will qualify as an "independent director" only if, in the opinion of that company's board of directors, that person does not have a relationship that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a director. In order to be considered to be independent for purposes of Exchange Act Rule 10A-3, a member of an audit
committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (1) accept, directly or
indirectly, any consulting, advisory, or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its
subsidiaries.
In                    2011,
our board of directors undertook a review of its composition, the composition of its committees and the independence of each of our directors. Based upon
information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our board of directors determined that none of
                                    ,
representing      of our six directors, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director
and that each of these directors is "independent" as that term is defined under Nasdaq Stock Market Rule 5605(a)(2). In making this determination, our board of directors considered the
relationships that each non-employee director has
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with
our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each
non-employee director.
BOARD LEADERSHIP STRUCTURE
Mr. Hansel, our President and Chief Executive Officer, was appointed as Chairman of our board of directors in November 2011. As
our President and Chief Executive Officer since our inception, Mr. Hansel has been a constant and integral part of the leadership of our board and company, and he is the director most familiar
with our business, industry and the challenges facing our company. Our board believes that Mr. Hansel is best situated to ensure that the board's attention and efforts are focused on the most
critical matters. Mr. Hansel's combined role ensures clear accountability, enables decisive leadership and enhances our ability to communicate our message and strategy clearly and consistently
to our stockholders, employees, customers and suppliers, particularly during our transition from being a privately-held company to a public company.
was
appointed to serve as our "Lead Independent Director" in                    2011. The duties of the Lead Independent Director include: establishing
board meeting agendas
with the Chairman; presiding at all meetings of the board in the absence of, or upon the request of, the Chairman; calling and presiding at all meetings of the non-management directors in
executive session; advising the Chairman and Chief Executive Officer on issues discussed at executive sessions of non-management directors; advising the nominating and corporate governance
committee and the Chairman on the membership of the various board committees and the selection of committee chairmen; advising the Chairman on the retention of board advisors and consultants;
reviewing with the Chief Executive Officer the non-management directors' annual evaluation of his performance; serving as a liaison between the non-management directors and the
Chairman; serving as a liaison between the board and our stockholders; and selecting an interim Lead Independent Director for meetings at which he cannot be present.
Our
board believes that its leadership structure is appropriate because it strikes an effective balance between strategy development, independent leadership and management oversight in
the board process.
BOARD COMMITTEES
Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance
committee. Each committee will operate under a charter that has been approved by our board of directors and will have the responsibilities described below. The members of each committee will be
appointed prior to the closing of this offering.
Audit committee
Each director who is appointed to serve on our audit committee will satisfy the requirements for financial literacy of The Nasdaq Stock
Market. Our board of directors has determined that Mr. Druten is an audit committee financial expert, as defined by SEC rules, and satisfies the financial sophistication requirements of The
Nasdaq Stock Market. Our audit committee's responsibilities include:
•
overseeing our accounting and financial reporting processes and the audits of our financial statements;
•
reviewing and approving our independent auditor's qualifications and independence;
•
evaluating the performance of our internal audit function and the adequacy and effectiveness of our control policies and
procedures;
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•
ensuring our compliance with tax, legal and regulatory requirements; and
•
preparing the report required by SEC rules for inclusion in our annual proxy statement.
Compensation committee
Our compensation committee's responsibilities include:
•
discharging the responsibilities of the board of directors relating to compensation of our executive officers and
directors;
•
administering our equity and incentive-based compensation plans;
•
preparing the annual report on executive compensation for inclusion in our annual proxy statement, in accordance with
applicable SEC rules and regulations; and
•
reviewing and discussing with management the Compensation Disclosure and Analysis required by rules and regulations of the
SEC.
Nominating and corporate governance committee
Our nominating and corporate governance committee's responsibilities include:
•
identifying individuals qualified to become members of the board of directors;
•
recommending to the board of directors the persons to be nominated for election as directors at any meeting of our
stockholders at which directors are elected;
•
developing and recommending a set of corporate governance principles applicable to our board of directors and regularly
reviewing and recommending proposed changes to such corporate governance principles;
•
recommending the members for each board committee to our board of directors; and
•
overseeing the evaluation of the board of directors and management.
CODE OF BUSINESS CONDUCT AND ETHICS
We have adopted a Code of Business Conduct and Ethics that applies to all of our directors, officers and employees, including our
president and chief executive officer, chief financial officer and other principal executive and senior financial officers. Following this offering, a copy of the Code will be available on our
website, which is located at www.smithelectric.com. To the extent permitted by SEC and Nasdaq rules and regulations, we intend to disclose information as to any amendments to the Code and any waivers
from provisions of the Code for our principal executive officer, principal financial officer, and certain other officers by posting the information on our website.
DIRECTOR COMPENSATION
Except as noted in the table below, our directors do not currently receive any cash compensation for their services as directors or as
board committee members. Except for the payments to Mr. Stanley identified below, we did not pay any other fees, make any equity awards, or pay any other compensation to our
non-employee directors in fiscal year 2010 for their
service as directors. The compensation that we paid to our President and Chief Executive Officer, our Chief Technology Officer and Senior Vice President and our former Chief Financial Officer, who
also were directors during 2010, is discussed in the "Executive Compensation" section of this prospectus.
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The
following table sets forth information regarding compensation earned by our non-employee directors during 2010:
Name
Fee Earned or
Paid in Cash ($)
Total ($)
John N. Bridge
—
—
Darren Kell
—
—
Bruce Shalett(1)
—
—
Roy Stanley(2)
$
74,189
$
74,189
(1)
Mr. Shalett
resigned from the board of directors effective March 2, 2010.
(2)
During
2010, we paid Mr. Stanley a monthly fee of 4,000 British pounds sterling for his services as a director. The U.S. dollar value was calculated
based on the U.S. Internal Revenue Service Yearly Average Currency Exchange Rates for 2010 of 0.647 pounds to the dollar. Mr. Stanley also received a bonus of $100,000 in April 2011 following
the successful completion of our Series B preferred stock financing and a bonus of $150,000 in November 2011 following the successful completion of our Series C preferred stock financing
and the transition to Smith Power and Smith Drive systems in the U.S. Mr. Stanley resigned from the board of directors effective November 4, 2011.
In
early 2011, management and our board of directors determined that it was advisable for us to implement new arrangements, to be effective upon the closing of this offering, for the
compensation of directors who are not employed by us or any of our subsidiaries. We retained Mercer LLC, a compensation consulting firm, to advise us on structuring compensation packages
competitive with companies of similar size, in similar industries or markets and at the same stage of maturity as us.
Mercer
analyzed market data compiled from the following companies, which we refer to as our Comparator Group, in order to develop a recommended non-employee director
compensation program:
A123 Systems, Inc.
Evergreen Solar, Inc.
American Superconductor Corporation
Fuel Systems Solutions, Inc.
Amyris, Inc.
GT Advanced Technologies, Inc.
Amtech Systems, Inc.
iRobot Corporation
Broadwind Energy, Inc.
Spartan Motors, Inc.
Clean Energy Fuels Corp.
Tesla Motors, Inc.
Ener1, Inc.
Westport Innovations Inc.
Energy Conversion Devices, Inc.
Winnebago Industries, Inc.
Based
on Mercer's recommendation, our board of directors adopted a non-employee director compensation policy that will become applicable to all of our
non-employee directors upon the closing
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of
this offering. The following table summarizes the terms of the compensation arrangements to which our non-employee directors will be entitled:
Cash compensation
Annual cash retainer
$
30,000
Supplemental cash retainer for Chairman
50,000
Supplemental cash retainer for Lead Independent Director
10,000
Cash retainer for service as board committee chair
Chair of audit committee
10,000
Chair of compensation committee
5,000
Chair of nominating and corporate governance committee
5,000
Board meeting fee(1)
1,500
Committee meeting fee(2)
1,250
Equity compensation
Annual equity grant
$
60,000
(1)
Represents
the per meeting fee payable for attendance at more than six board meetings per year.
(2)
Represents
the per meeting fee payable for attendance at more than six committee meetings per year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
John N. Bridge, Bruce Shalett and Roy Stanley served on our compensation committee during our fiscal year ended
December 31, 2010. Neither Mr. Shalett nor Mr. Stanley currently serves on our board of directors. No such member of our compensation committee is or has been a current or former
officer or employee of ours. Messrs. Shalett and Stanley had material interests in transactions with us that are reported under "Relationships and Related Person Transactions."
Dr. Bridge did not have any such interests. None of our executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of
any other entity, one of whose executive officers served as a director or member of our compensation committee during our fiscal year ended December 31, 2010.
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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
The following discussion and analysis of compensation arrangements of our named executive officers for 2010 and
2011 should be read together with the compensation tables and related disclosures set forth below. This discussion contains forward-looking statements that are based on our current considerations,
expectations, and determinations regarding future compensation programs. The actual amount and form of compensation and the compensation programs that we adopt may differ materially from current or
planned programs as summarized in this discussion.
Compensation philosophy
We intend to be a leading global producer of medium-duty commercial electric vehicles. In order to achieve this goal, we
must attract, retain and motivate talented, qualified and committed executive officers who share our philosophy and are willing to work toward this goal. However, as an early stage company we often
have not been in a position to immediately provide our executive officers with total compensation that is competitive with that offered by the companies with which we compete for talent. Instead, we
typically have hired our executive officers at compensation levels that were lower, and in some cases substantially lower, than the compensation paid to similarly situated executives in our industry
and geographic market, and increased our executives' compensation following the completion of financing transactions. This is particularly true for the executives who have been with us since early
2009.
Given
our limited operating history, we have not yet developed a formal compensation philosophy or program; however, the following general principles guide our executive compensation
decisions:
•
Executive compensation should reflect our financial position. Prior to this offering, we have relied on private financings
for working capital and have experienced periods of limited cash availability. As a result, we have structured our executives' total compensation to reflect our limited capital resources.
•
Our executive team generally should be compensated equitably relative to one another, based upon their respective duties
and their relative levels of responsibility and performance.
•
Our executives should bear financial risk, and reap financial reward, for the growth and success of our company.
In
early 2011, we retained Mercer to review our existing executive compensation program and work with our management to develop an executive compensation program that positions us to
compete for and retain executive talent, grow our business and create stockholder value as a public company. This is an ongoing process, the goals of which include:
•
Establishing a compensation program structure to attract and retain highly qualified executive officers.
•
Developing compensation guiding principles, including a comparative peer group and targeted market positioning for
different compensation elements.
•
Harmonizing salary, equity awards, and other compensation benefits for executive officers hired under different
circumstances.
•
Continuing to align executive officer compensation, both in individual cases and as a team, to the long-term
interests of stockholders.
•
Developing a flexibility that permits the accommodation of appropriate individual circumstances.
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•
Emphasizing clear, easily-measured performance goals to help align executive officer compensation with the
long-term interests of stockholders.
Named executive officers
The following persons are our "named executive officers" for 2010, as determined in accordance with SEC regulations.
Name
Principal Position
Bryan L. Hansel
President and Chief Executive Officer
Paul R. Geist(1)
Chief Financial Officer
Kevin Kelly(2)
Former Chief Financial Officer
Robin J. Mackie
Chief Technology Officer and Senior Vice President
Jacques D. Schira
General Counsel
Ben Kevin Neal
Vice President of Human Resources and Administration
(1)
Mr. Geist
became our Chief Financial Officer on November 22, 2010.
(2)
Mr. Kelly
resigned as our Chief Financial Officer effective August 15, 2010.
Historical process for determining compensation for our executive officers
Compensation for our executive officers historically has been individualized and has been based on a variety of factors, including, in
addition to the principles listed above, our need for that particular executive position. Our executive officers' compensation generally is established at the time the executives begin employment with
us and is memorialized in an employment agreement or offer letter.
Prior
to offering employment to an executive, our Vice President of Human Resources and Administration reviews multiple subscription-based and public compensation analyses that include
data for comparable executive positions in the Midwestern portion of the United States and at companies with which we believe we compete for executive talent. Once we have determined a market
compensation range for the position, our President and Chief Executive Officer weighs this information with our financial position, the candidate's experience and then-current
compensation, and how the market compensation range compares to the compensation we provide to our other executives, in order to develop a proposed compensation package for the position. This
compensation package then is subject to negotiation with the executive officer candidate. Once management and the executive officer candidate have reached agreement on the terms of the candidate's
compensation, our President and Chief Executive Officer presents the proposed arrangement to our board of directors for approval. The board retains the discretion to modify the terms of any such
proposed arrangement.
After
establishing an executive officer's total compensation at the time of hire, our board of directors, upon the recommendation of our President and Chief Executive Officer, may from
time to time increase the executive's compensation. These increases typically follow the completion of financing transactions and have been based on our President and Chief Executive Officer's
determination that the increases are merited based on our financial position, the executives' performance and their respective compensation levels relative to the rest of our executive team, and our
understanding of the relevant market for the executives' positions. Our board of directors has not, however, historically undertaken a systematic annual review of executive officer compensation.
We
currently do not have any policies for allocating compensation between long-term and short-term compensation or cash and non-cash compensation. Our
mix of compensation elements is designed to reward recent results and motivate long-term performance through a combination of cash and equity awards. Prior to 2011, following an initial
equity grant in connection with commencement of an executive officer's employment, we have not granted equity awards to our executives on an annual
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or
other regular basis. As a result of the historically infrequent grants of equity awards to our executive officers, we have not taken a systematic approach to targeting base salary and cash bonus as
a certain proportion of total compensation.
2011 executive employment agreements
Between September and November 2011, we entered into new employment agreements with each of our named executive officers, other than
Robin Mackie, who entered into an employment agreement with Smith Europe in November 2011. We entered into these new agreements in order to more closely align the benefits, including the severance
benefits, we provide to, and the restrictive covenants imposed on, our named executive officers. See "—Agreements with Executives" for descriptions of these agreements. The principal
economic terms of our arrangements with our named executive officers, such as base compensation, bonus eligibility and severance benefits, were relatively unchanged by our entry into these new
employment agreements. The principal differences between the agreements we entered into in 2011 and our named executive officers' prior employment agreements follow:
•
the maximum discretionary performance bonus that may be paid to a named executive officer for any year is no longer set at
100% of base salary; instead, this maximum performance bonus payout, as well as the performance targets applicable to the bonus opportunity, are determined annually by our President and Chief
Executive Officer or our board of directors or compensation committee;
•
we no longer provide any of our named executive officers with severance benefits upon the termination of their employment
with us by mutual agreement; and
•
in order to receive severance benefits under the new agreement, a named executive officer whose employment with us has
terminated is required to execute, deliver to us and not revoke a release of claims agreement.
Compensation elements
Given that we are an early stage company with limited resources and without publicly-traded equity securities, the primary focus of our
executive compensation program has been on attracting and retaining executive talent primarily through cash compensation in the form of base salary and bonuses. However, we also have made limited
equity grants in the form of stock options and restricted stock to our named executive officers and provide our named executive officers with severance benefits. Our named executive officers are
eligible to participate in our employee benefit plans and we also provide our named executive officers with certain perquisites our management and board of directors determines are reasonable and
appropriate. A description and the intended purpose of each of these compensation elements follows.
Base salary
We use base salaries to recognize the experience, skills, knowledge and responsibilities of our employees, including our named
executive officers. Base salaries for our named executive officers are established through negotiation at the time the executive is hired, taking into account the benchmarking data discussed above,
the executive's qualifications, experience and prior salary. None of our executive officers is currently party to an employment agreement that provides for automatic or scheduled increases in base
salary and no formulaic base salary increases are provided to our named executive officers. Our board of directors does, however, have the discretion to evaluate and adjust upwards the base salary of
each named executive officer based on the scope of an executive's responsibilities, individual contribution, prior experience and sustained performance. Any decision regarding salary increases may,
but need not, take into account the executive's current salary, equity ownership and the amounts paid to an executive's peers inside our company.
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In
November 2011 our board of directors approved base salary increases of $75,000 for our President and Chief Executive Officer and our Chief Technology Officer and Senior Vice
President. In
determining to approve these increases, the board considered these executives' significant contributions to growing our company since our inception in January 2009, particularly as related to our
recent financing activities, customer wins and transition to our Smith Power and Smith Drive systems in the U.S., and their respective total compensation levels as compared to similarly situated
executives at Comparator Group companies.
The
following table sets forth information regarding the annual base salary for fiscal years 2010 and 2011 for our named executive officers. Each named executive officer's base salary,
other than Mr. Mackie's base salary, was initially established in his employment agreement. Prior to November 8, 2011, Mr. Mackie provided services to us pursuant to an oral
agreement, which included an understanding regarding his base compensation.
Name
Fiscal 2010 Base Salary
Fiscal 2011 Base Salary
Bryan L. Hansel(1)
$
350,000
$
425,000
Paul R. Geist
265,000
265,000
Kevin Kelly(2)
175,000
—
Robin J. Mackie(3)
250,000
325,000
Ben Kevin Neal
175,000
175,000
Jacques D. Schira
225,000
225,000
(1)
Mr. Hansel's
base salary was increased to $425,000 effective November 4, 2011. Prior to this increase, his base salary was $350,000.
(2)
Mr. Kelly
resigned as our Chief Financial Officer effective August 15, 2010.
(3)
Mr. Mackie's
base compensation was increased to $250,000 effective April 1, 2010 and to $325,000 effective November 8, 2011. Prior to
these increases, his base compensation was $204,167 and $250,000, respectively.
Cash bonuses
We historically have paid cash bonuses to our executive officers following the completion of financing transactions, as we then have
the resources available to do so. These bonuses have been paid at the discretion of our President and Chief Executive Officer and our board of directors, and the amounts paid were determined at the
time the bonuses were approved. We use cash bonuses to reward our executive officers for their work in accomplishing our corporate goals and growing our company and to more closely align their total
compensation with the compensation paid to similarly situated executives in our industry and geographic market.
The
employment agreements we entered into when we hired our named executive officers (other than Mr. Mackie, who provided services to us pursuant to an oral agreement until
November 8, 2011) provided for a discretionary annual performance bonus opportunity equal to 100% of their respective base salaries that would be paid based on the achievement of individual and
corporate goals. These goals were established in the executives' employment agreements or were to be determined by our management team and approved by the board of directors prior to the relevant
performance year. To date, we have not provided any of our named executive officers with an annual performance bonus opportunity tied to specific performance goals due to our limited financial
resources. Our management team annually establishes strategic operational, financial and other goals for our company, which are reviewed and, as needed, revised, quarterly, but these goals are not
established or tracked for purposes of determining our executives' bonuses. As discussed under "—2011 executive employment agreements," the employment agreements we and our named executive
officers entered into in 2011
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also
provide for a discretionary annual performance bonus opportunity that would be paid based on the achievement of individual and corporate goals.
The
following table sets forth the cash bonuses we paid to our named executive officers in 2010. The bonuses were paid following the closing of our Series A debenture financing.
Name
2010 Bonus Amount
Bryan L. Hansel
$
100,000
Paul R. Geist(1)
—
Kevin Kelly
10,000
Robin J. Mackie
65,000
Ben Kevin Neal
20,000
Jacques D. Schira
10,000
(1)
Mr. Geist
was hired as our chief financial officer after bonuses were paid for 2010.
In
order to encourage Mr. Geist to join us, we agreed to pay Mr. Geist two nondiscretionary bonuses based on retention and our achievement of goals related to our initial
public offering. Mr. Geist is entitled to a guaranteed bonus of $100,000 if he remains employed by us through October 1, 2011, which we paid to Mr. Geist in October 2011.
Additionally, Mr. Geist is eligible to receive a cash bonus equal to 100% of his base salary, with 50% of such bonus becoming due and payable if a registration statement for our initial public
offering is filed with the SEC on or prior to October 21, 2012 and the remaining 50% becoming due and payable if we complete our initial public offering by October 21, 2012.
Equity grants
We offer long-term incentives to our named executive officers through grants of stock options and restricted stock. We
primarily use stock options and restricted stock to compensate our named executive officers in the form of initial grants in connection with the commencement of employment. We also made stock option
grants to our executive officers in April 2011 and to certain of our executive officers in November 2011, following the closing of our Series B financing and the closing of our 2011convertible
notes financing and launch of our second generation Smith Newton, respectively. See "—2011 bonuses and equity awards."
Prior
to this offering, our executives were eligible to participate in our 2009 Incentive Compensation Plan. Following the closing of this offering, our executives will be eligible to
receive stock-based awards pursuant to our 2012 Incentive Plan. Under the 2012 Incentive Plan, our executives are eligible to receive grants of stock options, stock appreciation rights, shares of
restricted stock, restricted stock units and any other form of stock-based awards. The plan also permits cash incentive awards. See "—Equity Compensation Plans" for a description of the
2009 Incentive Compensation Plan and 2012 Incentive Plan.
Prior
to our November 2011 stock option grants, the stock options and restricted shares we have granted to our executives generally cliff vest on the second anniversary of the grant
date, and vesting is accelerated upon a change in control of us, an initial public offering of our stock or the existence of "good reason." The stock options we granted in November 2011 vest as to 50%
of the shares covered by the options on the first anniversary of the grant date and vest as to the remaining 50% of the covered shares on the second anniversary of the grant date. Vesting of these
options accelerates upon a change of control of us or if "good reason" exists. Good reason generally exists if we (i) materially reduce a named executive officer's compensation or position,
duties or responsibilities, (ii) assign duties materially inconsistent with a named executive officer's position, (iii) materially and adversely change a named executive officer's
reporting relationships, (iv) require the named executive officer to be based
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at
a location more than 75 miles from the office at which the executive was based when the grant was made or (v) materially breach any employment agreement we have entered into with the named
executive officer. Vesting is also accelerated if a named executive officer is terminated without cause or as a result of death or disability or if a named executive officer resigns for good reason.
In such a case, stock options will become exercisable for the 120 days following the termination of employment. "Cause" generally exists if the named executive officer has (a) been
grossly negligent or engaged in willful misconduct, fraud, embezzlement, acts of dishonesty or a conflict of interest relating to our affairs; (b) been convicted of or pleaded nolo contendere
to any crime relating to our business affairs; or (c) engaged in a willful violation of any federal or state securities laws. A named executive officer will forfeit all unvested equity awards
if he or she is terminated for cause or resigns without good reason. Prior to the exercise of a stock option, the holder has no rights as a stockholder with respect to the shares subject to such
option, including voting rights or the right to receive dividends or dividend equivalents.
We
do not have any equity ownership guidelines for our executives, but believe that equity grants provide our executives with a strong link to our long-term performance,
create an ownership culture and help to align the interests of our executives and our stockholders. In particular, because employees profit from stock options only if our stock price increases
relative to the stock option's exercise price, we believe stock options provide meaningful incentives to employees to achieve increases in the value of our stock over time. Additionally, the vesting
feature of our equity grants contributes to executive retention by providing an incentive to our executives to remain in our employ during the vesting period.
We
have historically granted stock options at exercise prices of no less than the fair market value of shares of our common stock on the date of grant as determined by our management or,
with respect to stock options granted under our 2009 Incentive Compensation Plan, our compensation committee. The exercise price of all stock options granted after the closing of this offering will be
equal to the fair market value of shares of our common stock on the date of grant, which generally will be determined by reference to the market price of our common stock. We historically have not had
a program, plan or practice of selecting grant dates for equity incentive awards to our executive officers in coordination with the release of material non-public information. As a
privately-held company, there has been no market for our common stock. Accordingly, to date we do not have a program, plan or practice pertaining to the timing of stock option grants to
executive officers coinciding with the release of material non-public information. Following this offering, we intend
for all equity awards we grant to be granted shortly after publication of our quarterly or annual earnings releases.
Severance benefits
We have agreed in each of our named executive officer's employment agreement, under certain circumstances, to provide such executives
severance benefits and/or accelerated vesting of equity awards if their respective employment terminates. We believe that providing these benefits to our named executive officers incentivizes them to,
among other things, cooperate in negotiating any change of control, including a change of control in which they believe they may lose their jobs. See "—Potential Payments Upon Termination
or Change of Control" and "—Agreements with Executives" for a description of these benefits and our named executive officers' employment agreements.
Benefits and perquisites
We maintain broad-based welfare benefits that are made available to all employees from time to time and subject to the terms of the
applicable plan, including our medical, dental and vision care plans, life and accidental death and dismemberment insurance policies and long-term and short-term disability
plans. These benefits are designed to attract and retain employees and provide security for their health and welfare needs. Our named executive officers are eligible to participate in each of these
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programs
on the same terms as non-executive employees, except that we pay 100% of the premiums for our U.S.-based named executive officers' medical and dental insurance coverage, whereas
we pay only 70% of such premiums for our U.S.-based employees generally. We do not at this time offer any retirement benefits. We also provide our executive officers with perquisites that we believe
complement other compensation vehicles and enable us to attract and retain key executives. These perquisites include automobile allowances, company-paid cell phone plans, airline club
memberships, use of a corporate apartment and reimbursement of commuting expenses.
2011 bonuses and equity awards
We paid cash bonuses and granted stock options to our named executive officers in April and to certain of our executive officers in
November 2011. Our President and Chief Executive Officer recommended and our board of directors approved cash bonuses and stock option grants to Messrs. Hansel, Mackie, Neal and Schira
following the completion of our Series B financing and the completion of our 2011 convertible notes financing and the launch of our second generation Smith Newton. Mr. Geist received
stock option and restricted stock grants in April 2011 in respect of a sign-on equity award and we paid Paul Geist a $100,000 retention bonus provided for under his employment agreement in
October 2011.
The
options granted to Messrs. Hansel, Mackie, Neal and Schira in April 2011 will vest on March 8, 2013, and the options and restricted shares granted to Mr. Geist
in April 2011 will vest on November 22, 2012, or in either case, immediately upon a change of control of us or the completion of this offering or if good reason exists. The stock options we
granted in November 2011 vest as to 50% of the shares covered by the options on the first anniversary of the grant date and vest as to the remaining 50% of the covered shares on the second anniversary
of the grant date. Vesting of these options accelerates upon a change in control of us or if good reason exists.
The
cash and stock option awards made to our named executive officers to date in 2011, and the mix of cash and options included in the total award amounts, were intended to reward our
executives for their efforts in connection with our financing and operational successes, provide our executives significant cash payments at times when we had the resources available to do so and also
to foster retention, help further align our executives' interests with those of our stockholders and to motivate our executives to continue to work towards our initial public offering. The stock
option grants made to Messrs. Neal and Schira in November 2011 also were intended to return their equity interests in our company to approximately one percent of our fully diluted common stock.
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The
following table sets forth information regarding the cash bonuses paid and restricted stock and stock options granted to our named executive officers to date in 2011.
Equity Awards
Name
Cash Bonus
Grant Date
Restricted Stock
(Number of Shares)
Option Grants (Number
of Underlying Shares)
Exercise Price
of Options
Bryan L. Hansel
$
325,000
April 29, 2011
30,000
$
12.04
November 4, 2011
—
100,000
12.38
Paul R. Geist
100,000
April 29, 2011
101,422
November 4, 2011
—
—
Kevin Kelly(1)
—
—
—
—
—
Robin J. Mackie
275,000
April 29, 2011
30,000
12.04
November 4, 2011
—
65,000
12.38
Ben Kevin Neal
97,500
April 29, 2011
10,000
12.04
November 4, 2011
—
100,000
12.38
Jacques D. Schira
122,500
April 29, 2011
10,000
12.04
November 4, 2011
—
100,000
12.38
(1)
Mr. Kelly
resigned as our Chief Financial Officer effective August 15, 2010 and was not considered for a bonus.
Role of the compensation committee in setting executive compensation
Historically, our President and Chief Executive Officer and our entire board of directors have assumed responsibility for our executive
compensation program. Going forward, our compensation committee will assume this responsibility and will have the overall responsibility for recommending to our board of directors the compensation of
our President and Chief Executive Officer and determining the compensation of our other executive officers.
Tax considerations
Section 162(m) of the Internal Revenue Code of 1986, as amended generally will disallow a tax deduction for compensation in
excess of $1.0 million paid to our President and Chief Executive Officer and our three other most highly paid executive officers (other than our Chief Financial Officer) unless such
compensation is "performance-based" under Section 162(m). However, under a Section 162(m) transition rule for compensation plans or agreements of corporations which are privately held
and which become publicly held in an initial public offering, compensation paid under a plan or agreement that existed prior to the initial public offering will not be subject to Section 162(m)
until the earlier of (1) the expiration of the plan or agreement; (2) a material modification of the plan or agreement; (3) the issuance of all employer stock and other
compensation that has been allocated under the plan; or (4) the first meeting of stockholders at which directors are to be elected that occurs after the close of the third calendar year
following the year of the initial public offering. The earlier of such dates is referred to as the "Transition Date." Consequently, we may rely on the exemption from Section 162(m) afforded to
us by the transition rule described above for compensation paid pursuant to any pre-existing compensation plans or agreements. After the Transition Date, compensation paid to such
executives will be subject to the limit under Section 162(m) unless it is meets the requirements to be qualifying performance-based compensation. We will periodically review the potential
consequences under Section 162(m) of paying non-performance based compensation in excess of $1.0 million in any year to our executive officers. Our compensation committee
may, in its judgment, authorize compensation payments that do not comply with the exemption in Section 162(m) when it believes that such payments are appropriate to attract and retain executive
talent and are in our best interest and that of our stockholders.
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SUMMARY COMPENSATION TABLE
The following table summarizes the compensation paid to or earned by our named executive officers for 2010.
Name and Principal Position
Year
Salary
Bonus
All Other
Compensation
Total
Bryan L. Hansel
2010
$
350,000
$
100,000
$
28,668
(4)
$
478,668
President and Chief Executive Officer
Paul R. Geist(1)
2010
$
18,163
$
—
$
—
$
18,163
Chief Financial Officer
Kevin Kelly(2)
2010
$
144,958
$
10,000
$
11,811
(5)
$
166,769
Former Chief Financial Officer
Robin J. Mackie(3)
2010
$
238,685
$
65,000
$
78,512
(6)
$
382,197
Chief Technology Officer and Senior Vice President
Ben Kevin Neal
2010
$
175,000
$
20,000
$
16,313
(7)
$
211,313
Vice President of Human Resources and Administration
Jacques D. Schira
2010
$
225,000
$
10,000
$
21,064
(8)
$
256,064
General Counsel
(1)
Mr. Geist
became our Chief Financial Officer on November 22, 2010, and received a prorated base salary for the remainder of 2010 based on an
annual base salary of $265,000.
(2)
Mr. Kelly
resigned as our Chief Financial Officer effective August 15, 2010.
(3)
The
amount reported in the "Salary" column represents the base compensation paid to Mr. Mackie for his services during 2010. In 2010 we did not
separately provide Mr. Mackie with health or welfare benefits.
(4)
Includes
an automobile allowance, a company-paid cellular telephone and data service plan, the payment of health insurance premiums and the
payment of annual dues for Mr. Hansel's membership in professional and other associations and clubs.
(5)
Includes
an automobile allowance, a company-paid cellular telephone service plan and the payment of health insurance premiums.
(6)
Includes
an automobile allowance, reimbursement of commuting expenses incurred by Mr. Mackie for trips between our Kansas City, Missouri headquarters
and his home in the United Kingdom, reimbursement for the costs of a travel insurance policy, company-paid cellular telephone and data service plans, and the use of our corporate apartment
in Kansas City, Missouri. The amount set forth in the "All Other Compensation" column includes the following amounts paid in 2010 but accrued in 2009: an automobile allowance of $3,000, commuting
expenses of $5,172, and cellular telephone and data service plan costs of $1,676. We reimbursed Mr. Mackie for aggregate commuting expenses of $52,885, which consisted of airfare and rental car
costs. The aggregate cost to the company of Mr. Mackie's use of our corporate apartment was calculated by multiplying the number of nights Mr. Mackie stayed at the apartment by $47,
which is the daily cost to us of the apartment, including rent and utilities.
(7)
Includes
an automobile allowance, a company-paid cellular telephone service plan and the payment of health insurance premiums.
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(8)
Includes
an automobile allowance, a company-paid cellular telephone service plan, the use of our corporate apartment in Kansas City, Missouri
and the reimbursement of health insurance premiums. The aggregate cost to the company of Mr. Schira's use of our corporate apartment was calculated by multiplying the number of nights
Mr. Schira stayed at the apartment by $47, which is the daily cost to us of the apartment, including rent and utilities.
Our
policy is to pay 100% of our executive officers' health insurance premiums. We pay 70% of the health insurance premiums for our other employees, and report in the "All Other Compensation" column
the dollar amount of the difference between 100% and 70% of our named executive officers' health insurance premiums (except for Mr. Mackie, who was not provided with this benefit in 2010
because he procured his own health insurance in the United Kingdom, and Mr. Schira). During 2010, Mr. Schira did not participate in our health insurance program and instead purchased his
own health insurance. We reimbursed Mr. Schira for 100% of his health insurance premiums, which were higher than the premiums that would have been payable under our health insurance plan. The
amount included in the "All Other Compensation" column related to Mr. Schira's health insurance premiums represents the difference between the aggregate amount of premiums reimbursed to
Mr. Schira during 2010 and 70% of the total health insurance premiums that would have been payable by him during 2010 if he had participated in our health insurance plan.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table reflects all outstanding equity awards held by each of our named executive officers as of December 31, 2010:
Option Awards
Name
Date of Grant
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
Option Exercise
Price(1)
Option Expiration
Date
Bryan L. Hansel
—
—
—
$
—
—
Paul R. Geist
—
—
—
$
—
—
Kevin Kelly
—
—
—
$
—
—
Robin J. Mackie
—
—
—
$
—
—
Ben Kevin Neal
12/18/2009
128,344
(2)
0
$
0.73
12/18/2019
(4)
Jacques D. Schira
12/18/2009
128,344
(3)
0
$
0.73
12/18/2019
(4)
(1)
In
2009, we retained a third party valuation firm to determine the fair market value of our common stock, on a non-marketable, minority
ownership basis, as of December 1, 2009. The valuation firm determined the fair market value of our common stock to be $0.73 per share as of December 1, 2009.
(2)
Mr. Neal's
option vested on February 23, 2011.
(3)
Mr. Schira's
option vested on March 23, 2011.
(4)
In
accordance with the terms of Mr. Schira's and Mr. Neal's stock option agreements, all unvested portions of their stock options terminate
immediately upon termination of the officer's employment. Any vested but unexercised portion of their options terminates upon the earliest to occur of the following: (i) 120 days
following termination of the officer's employment with us without cause; (ii) immediately upon termination of the officer's employment with us for cause; (iii) 12 months following
termination of the officer's employment with us by reason of death or disability; (iv) immediately upon on our liquidation, dissolution or reorganization in which we are not a surviving entity;
(v) December 18, 2019, which is the expiration date of the option; or (vi) 120 days following termination of the officer's employment with us for good reason or without
good reason.
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POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
Our named executive officers' employment agreements provide for the compensation and benefits, if any, payable to the executive if his
or her employment with us is terminated or a change of control of us occurs.
The
following table sets forth the payments and benefits that would have accrued to each named executive officer, other than Kevin Kelly, if such named executive officer's employment had
been terminated effective as of December 31, 2010, in each of the circumstances identified in the table. Mr. Kelly did not receive any payment or benefits, and all of his previously
granted stock options were cancelled, upon his resignation as our Chief Financial Officer effective August 15, 2010. The benefits reflected in the table below are based on the employment
agreements we entered into with our named executive officers, other than Mr. Kelly, in 2011 and, where applicable, the terms of the named executive officers' stock option award agreements. A
named executive officer's receipt of the benefits set forth in the table below is conditioned on the named executive officer executing and not revoking an applicable release of claims agreement with
us. If we had not entered into new employment agreements with our named executive officers in 2011, Mr. Mackie would not be entitled to receive any
benefits upon the termination of his employment or a change in control of us and Mr. Hansel would be entitled to receive $175,000 if his employment was terminated by mutual agreement.
We
determined that the fair value of our common stock as of December 31, 2010 was $12.04 per share, based on the per share price at which we sold our Series B preferred
stock to unrelated third parties during March 2011, which also is the price at which our Series B preferred stock is convertible into our common stock. In determining this fair value, our board
of directors took into consideration that (i) the Series B preferred stock is convertible into shares of our common stock on a one-to-one basis and has voting
rights, (ii) the Series B preferred stock automatically converts into shares of our common stock at the time of an initial public offering, (iii) the Series B preferred
stock has no
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dividend
rights and is non-interest bearing, and (iv) the Series B preferred stock has certain preferences and rights senior to those of our common stock.
Name
Termination by
Employee
following
Change of
Control
Termination
without Cause
Termination
for Cause
Termination
upon Death or
Disability
Resignation
without Good
Reason
Resignation with
Good Reason(1)
Bryan L. Hansel
Base Salary
$
425,000
$
425,000
$
—
$
425,000
$
—
$
425,000
Bonus
100,000
100,000
—
100,000
—
100,000
Equity compensation
—
—
—
—
—
—
Total
525,000
525,000
—
525,000
—
525,000
Paul R. Geist
Base Salary
$
265,000
$
265,000
$
—
$
265,000
$
—
$
265,000
Bonus
—
—
—
—
—
—
Equity compensation(2)
—
—
—
—
—
—
Total
265,000
265,000
—
265,000
—
265,000
Robin J. Mackie
Base Salary
$
325,000
$
325,000
$
—
$
325,000
$
—
$
325,000
Bonus
65,000
65,000
—
65,000
—
65,000
Equity compensation
—
—
—
—
—
—
Total
390,000
390,000
—
390,000
—
390,000
Ben Kevin Neal
Base Salary
$
87,500
$
87,500
$
—
$
87,500
$
—
$
87,500
Bonus
20,000
—
—
20,000
—
20,000
Equity compensation
1,451,571
(3)
—
—
—
—
—
Total
1,559,071
87,500
—
107,500
—
107,500
Jacques D. Schira
Base Salary
$
112,500
$
112,500
$
—
$
112,500
$
—
$
112,500
Bonus
10,000
—
—
10,000
(4)
—
10,000
Equity compensation
1,451,571
(4)
—
—
—
—
—
Total
1,574,071
112,500
—
122,500
—
122,500
(1)
Each
of our named executive officer's employment agreement provides that, upon the termination of his or her employment in this circumstance, he or she
would receive a pro-rated amount of the bonus he or she would have received for the fiscal year in which the termination occurred had he or she remained employed with us. The amounts
reflected are the actual cash bonuses paid in 2010. Given that we have never paid performance bonuses, we believe that including the actual bonuses paid in the table above more accurately reflects the
amounts our named executive officers would receive if their employment was terminated in the events specified in the table than would omitting these bonus payments.
(2)
Mr. Geist's
stock options and shares of restricted stock were not granted until April 2011.
(3)
Mr. Neal's
stock options vest and become exercisable immediately upon a change of control of us. The amount reported is equal to the number of shares
of common stock subject to the option multiplied by the difference between the fair market value of our common stock as of December 31, 2010 ($12.04 per share) and the exercise price of the
option ($0.73 per share).
(4)
Mr. Schira's
stock options vest and become exercisable immediately upon a change of control of us. The amount reported is equal to the number of
shares of common stock subject to the option multiplied by the difference between the fair value of our common stock as of December 31, 2010 ($12.04 per share) and the exercise price of the
option ($0.73 per share).
In addition to the amounts set forth in the table above, in the event of (i) a termination by the executive following a change of control
of us, (ii) a termination without cause, (iii) a termination upon death or disability, or (iv) a resignation with good reason, we have agreed to pay the cost of COBRA family
coverage for our named executive officers other than Mr. Mackie for a period of 12 months following the termination date.
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The
following table sets forth the payments and benefits that would have accrued to each named executive officer, other than Kevin Kelly, if a change of control of us had occurred
effective as of December 31, 2010. See the "Termination by Employee following Change of Control" column in the preceding table for the payouts that apply to a termination following a change of
control. Information is not presented for Mr. Kelly because he was not employed by us on such date.
Name
Base Salary
Bonus
Equity Compensation
Total
Bryan L. Hansel
$
—
$
—
$
—
$
—
Paul R. Geist
—
—
—
—
Robin J. Mackie
—
—
—
—
Ben Kevin Neal
—
—
1,451,571
(1)
1,451,571
Jacques D. Schira
—
—
1,451,571
(1)
1,451,571
(1)
Messrs. Neal
and Schira's stock options vest and become exercisable immediately upon a change of control of us. The amount reported is equal to the
number of shares of common stock subject to the option multiplied by the difference between the fair value of our common stock as of December 31, 2010 ($12.04 per share) and the exercise price
of the option ($0.73 per share).
AGREEMENTS WITH EXECUTIVES
Between September and November 2011, we entered into new employment agreements with each of our named executive officers, the terms of
which are summarized below. The agreements replaced in all respects our named executive officers' prior employment agreements or arrangements. Under each employment agreement, the executive is
eligible to be considered for an annual discretionary performance bonus of up to an amount determined by our President and Chief Executive Officer and/or our board of directors (or a board committee),
based on performance criteria determined by the board (or a board committee) each performance year. We agreed to pay or, as applicable, reimburse each executive for, 100% of the cost of various
insurance coverages maintained by the executive for him or herself and his or her family. We also agreed to pay for each executive's membership in various professional and social associations as may
be deemed appropriate by our President and Chief Executive Officer or our board of directors, as applicable. Each employment agreement subjects the executive to customary confidentiality and
assignment of inventions covenants, and prohibits the executive from competing with us, or soliciting for hire any of our employees for the purpose of competing with us, during the term of the
executive's employment with us and for a period of 12 months thereafter.
Upon
any termination of an executive's employment, the executive is entitled to receive all accrued but unpaid benefits, reimbursements and base salary owed to him or her as of the date
of his or her termination. Upon termination of the executive's employment agreement (i) by us upon his or her death or disability, (ii) by us without cause, (iii) by him or her
for good reason or (iv) by him or her following a change of control of us, the executive also is entitled to receive (a) 100% of his or her then current base salary, (b) COBRA
coverage for the executive and his or her family for 12 months following the date of his or her termination at our expense, except for Mr. Mackie, to whom COBRA coverage does not apply,
(c) the amount of any performance bonus that has been earned in a prior year but remains unpaid as of the date of termination and (d) a pro-rated portion of any performance
bonus he or she would have received for the fiscal year in which his or her employment is terminated.
All severance payments and benefits provided to the executive upon termination are conditioned on the executive executing and not revoking an applicable release of claims agreement with us.
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Bryan L. Hansel
We entered into an employment agreement with Mr. Hansel, our President and Chief Executive Officer, on November 2, 2011.
The employment agreement does not have a specific term. Under the agreement, Mr. Hansel is entitled to an annual base salary of $425,000. We agreed to provide Mr. Hansel with an
automobile allowance of $1,000 per month.
Paul R. Geist
We entered into an employment agreement with Mr. Geist, our Chief Financial Officer, on September 14, 2011. The
employment agreement does not have a specific term. Under the agreement, Mr. Geist is entitled to an annual base salary of $265,000. Mr. Geist also is entitled under his employment
agreement to a guaranteed performance bonus payment in the amount of $100,000 if he remains employed by us through October 1, 2011. We paid this bonus to Mr. Geist in October 2011.
Additionally, Mr. Geist is eligible to receive a cash bonus equal to 100% of his base salary, with 50% of such bonus becoming due and payable if a registration statement for our initial public
offering is filed with the SEC on or prior to October 21, 2012 and the remaining 50% becoming due and payable if we complete our initial public offering on or prior to October 21, 2012.
We agreed to provide Mr. Geist with an automobile allowance of $750 per month.
Kevin Kelly
We entered into an employment agreement with Mr. Kelly, our former Chief Financial Officer, on November 1, 2009. The
employment agreement was terminated upon Mr. Kelly's resignation on August 15, 2010. Under the agreement, Mr. Kelly was entitled to an annual base salary of $175,000 and was
eligible for an annual performance bonus of up to 100% of his base
salary. We agreed to pay 100% of the cost of various insurance coverages maintained by Mr. Kelly for himself and his family, to provide Mr. Kelly with an automobile allowance of $750 per
month and to pay for Mr. Kelly's membership in various professional and social associations as may be deemed appropriate by our President and Chief Executive Officer. Mr. Kelly did not
receive any severance benefits and forfeited his equity awards upon the termination of his employment.
Robin J. Mackie
Smith Europe entered into an employment agreement with Mr. Mackie, our Chief Technology Officer and Senior Vice President, which
became effective on November 8, 2011. Prior to such date, Mr. Mackie provided services to us pursuant to an oral agreement. Mr. Mackie's employment agreement does not have a
specific term. Under the agreement, Mr. Mackie is entitled to an annual base salary of $325,000 and we agreed to provide Mr. Mackie with an automobile allowance of £1,000 per
month.
Ben Kevin Neal
We entered into an employment agreement with Mr. Neal, our Vice President of Human Resources and Administration, on
September 14, 2011. The employment agreement does not have a specific term. Under the agreement, Mr. Neal is entitled to an annual base salary of $175,000. We agreed to provide
Mr. Neal with an automobile allowance of $750 per month.
Jacques D. Schira
We entered into an employment agreement with Mr. Schira, our General Counsel, on September 14, 2011. The employment
agreement does not have a specific term. Under the agreement, Mr. Schira is entitled to an annual base salary of $225,000. We agreed to provide Mr. Schira with an automobile allowance of
$750 per month.
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EQUITY COMPENSATION PLANS
2009 Incentive Compensation Plan
Our 2009 Incentive Compensation Plan, or 2009 Plan, was adopted by our board of directors in December 2009 and approved by our
stockholders on December 18, 2009. We have awarded only incentive and nonqualified stock options and restricted stock under the 2009 Plan. The 2009 Plan also provides for stock appreciation
rights, deferred stock awards, bonus stock and awards, dividend equivalents, performance awards and other stock-based awards to persons who provide services to us, including officers, directors,
employees and consultants of us or any subsidiary.
The
2009 Plan is administered by our board of directors, or a committee it appoints, which has full and final authority with respect to the 2009 Plan and awards granted under the plan.
As administrator, our board of directors has the authority, subject to the terms of the 2009 Plan to establish, amend, and revoke rules and regulations it considers appropriate for the administration
and interpretation of the 2009 Plan.
A
total of 1,119,400 shares of our common stock were made available under the 2009 Plan. In any fiscal year, no participant may be granted options or stock appreciation rights with
respect to more than 447,760 shares under the plan. The maximum dollar value payable to any participant with respect to performance units is $1,000,000 for any twelve month performance period and
$2,000,000 with respect to any performance period greater than twelve months.
The
board of directors, or the committee appointed by the board, has discretion to determine the terms and conditions of each award; however, the exercise price of options granted under
the 2009 Plan must be at least the fair market value of our common stock, or if incentive stock options are granted to an employee who holds more than ten percent of the combined voting power of the
company, the exercise price must be at least 110% of the fair market value of our common stock. If a stock option or other stock award expires or otherwise terminates without having been exercised in
full, the unpurchased shares subject to such awards will become available for future grant or sale under the 2009 Plan.
In
the event of a change in control, any unvested option granted under the 2009 Plan will vest immediately and any restrictions or forfeiture provisions will lapse and performance goals
and
conditions may be deemed as having been met. In the event of an initial public offering, stock options granted to certain of our executives will vest immediately pursuant to the terms of their
individual agreements. A change in control generally occurs upon the acquisition of more than 50% of the value of equity or the combined voting power of the company; any two years during which a
majority of our new directors are not approved by a majority of the incumbent board of directors; the occurrence of a reorganization, merger, statutory share exchange, consolidation or similar event
with respect to us, or sale of all or substantially all of our assets; or approval by our stockholders of a complete liquidation or dissolution of us.
Generally,
awards or interests granted under the 2009 Plan may only be assigned or transferred by will or laws of descent or to a beneficiary upon the grantee's death, but awards other
than incentive stock options may be transferred if permitted by the terms of the award and by the board of directors. The board of directors may amend, alter, suspend, discontinue or terminate the
2009 Plan, subject to stockholder approval if required by applicable law or stock market requirements.
As
of November 4, 2011, there were options to purchase an aggregate of 1,114,688 shares of common stock outstanding under the 2009 Plan at a weighted average exercise price of
$9.66 per share. As of such date, no shares of common stock had been issued upon the exercise of options granted under the 2009 Plan.
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Only
option awards and restricted stock were granted under the 2009 Plan. An option award under the 2009 Plan grants a right to the participant to purchase shares at a specific price
during a specific time period, based on the fair market value of the shares at the grant date. Options may be granted as either incentive stock options or as nonqualified stock options. A restricted
stock award is a grant to receive our common stock subject to various restrictions, including restrictions on transferability and forfeiture provisions. The administrator will advise the purchaser of
the terms, conditions, and restrictions related to the grant.
Following
the closing of this offering, no additional awards will be granted under the 2009 Plan, but the 2009 Plan will continue to govern the terms and conditions of the outstanding
awards previously granted thereunder.
2012 Incentive Plan
Our 2012 Incentive Plan, or 2012 Plan, which will become effective upon the closing of this offering, was adopted by our board of
directors on May 9, 2011 and approved by our stockholders on November 3, 2011. The 2012 Plan provides for the grant of incentive and nonqualified stock options, stock appreciation
rights, shares of restricted stock, restricted stock units and any other form of stock-based awards. The plan also permits cash incentive awards.
Our
employees, officers, directors, consultants and advisors, and the employees, officers, directors, consultants and advisors of any of our present or future parent or subsidiaries, are
eligible to receive awards under our 2012 Plan; however, incentive stock options may only be granted to employees of us, our parent or any of our subsidiaries. Upon effectiveness of the plan,
3,000,000 shares of our common stock will be reserved for issuance under the 2012 Plan, of which 300,000 may be issued as incentive stock options. The maximum amount that may be earned as a cash
performance-based award for a single calendar year by any participant is $2,000,000, and the maximum amount that may be earned as a cash award for a performance period of greater than a single
calendar year by any participant is $6,000,000. The maximum number of shares that may be earned in any calendar year as a performance-based award is 1,000,000.
Awards
granted to participants under the 2012 Plan will vest only if certain conditions set forth in their awards are met. Vesting criteria can include the passage of time or the
attainment of performance objectives, or both. Participants in the plan do not need to be treated uniformly.
The
2012 Plan will be administered by the committee appointed by our board of directors, which will have authority to grant awards and determine the recipients, exercise price,
conditions and other terms of such awards, provided that the exercise price for stock options must be at least the fair market value of our common stock as of the date the award is granted or, in the
case of incentive stock options granted to a holder of ten percent or more of voting power, at least 110% of the fair market value of our common stock as of the date the award is granted. The
committee will also have full discretionary authority to interpret the terms of the 2012 Plan and any awards made under the plan and to grant substitute awards under certain circumstances.
Performance-based awards must be based on one or more performance criteria set forth in the 2012 Plan, with the specific criteria to apply to each award to be at the discretion of the compensation
committee. Unless the committee appointed by the board of directors provides otherwise, holders of restricted stock will be able to receive dividends, if any, paid to owners of such shares. Any
dividend or distribution, other than a cash distribution, will be subject to those restrictions to which the award is subject. If permitted by applicable law, the compensation committee may delegate
its authority to a subcommittee or to our management.
Upon
a change in capitalization, such as a stock spilt, stock dividend or reclassification of shares, we will adjust the number of securities available under the 2012 Plan and the terms
of the outstanding awards, such as the number of securities and exercise price, as determined by the compensation committee.
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Upon
a change in control of the company, the compensation committee has discretion to provide that one or more of the following occur with regard to all or any outstanding awards under
the 2012 Plan:
•
awards will be assumed or that substantially equivalent awards will be substituted by the acquiring or succeeding entity,
•
the participants' unexercised awards will terminate immediately prior to the change in control unless exercised within a
specified time period provided by written notice,
•
outstanding awards will become exercisable, realizable or deliverable (or restrictions will lapse) before or upon the
change in control,
•
a cash payment be made to participants, if a cash payment would be made for shares surrendered in the change of control,
or
•
in connection with a liquidation or dissolution, awards will convert into the right to receive the liquidation proceeds.
A
change in control generally will occur upon the acquisition of 40% or more of either our outstanding shares or combined voting power; if the majority of new directors on our board are
not approved by a majority of the incumbent board; if a reorganization, merger or consolidation of us or other similar disposition of our assets occurs; or approval by our stockholders of a complete
dissolution or liquidation of us.
Awards
under the 2012 Plan are only transferable by will, the laws of descent or pursuant to a qualified domestic relations order. No award may be granted under the 2012 Plan on or after
the tenth anniversary of the date on which our initial public offering of common stock closes. The compensation committee may amend, suspend or terminate the 2012 Plan at any time, except that
stockholder approval will be required to comply with applicable law or stock market requirements.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our certificate of incorporation, which also will become effective upon the closing of this offering, limits the liability of our
directors for monetary damages for breach of fiduciary duty to the maximum extent permitted by the Delaware General Corporation Law and provides that no director will have personal liability to us or
to our stockholders for monetary damages for breach of fiduciary duty as a director. However, these provisions do not eliminate or limit the liability of any of our
directors:
•
for any breach of the director's duty of loyalty to us or our stockholders;
•
for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
•
for voting or assenting to unlawful payments of dividends, stock repurchases or other distributions; or
•
for any transaction from which the director derived an improper personal benefit.
Any
amendment to or repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to such
amendment or repeal. If the Delaware General Corporation Law is amended to provide for further limitations on the personal liability of directors of corporations, then the personal liability of our
directors will be further limited to the maximum extent permitted by the Delaware General Corporation Law.
Our
certificate of incorporation and by-laws, which will become effective upon the closing of this offering, provide that, subject to certain exceptions, we are required to
indemnify our directors, officers, employees and agents, in each case to the fullest extent permitted by Delaware law. Our by-laws also
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provide
that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any
officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under the
provisions of Delaware law. We have entered and expect to continue to enter into agreements to indemnify our directors, officers and other employees as determined by our board of directors. With
specified exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys' fees, judgments, fines and settlement amounts incurred by any of these
individuals in any action or proceeding. We believe that these by-law provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and
officers. We also maintain directors' and officers' liability insurance.
Certain
of our non-employee directors may, through their relationships with their employers, be insured and/or indemnified against certain liabilities in their capacity as
members of our board of directors.
The
limitation of liability and indemnification provisions in our certificate of incorporation and by-laws may discourage stockholders from bringing a lawsuit against our
directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might
benefit us and other stockholders. Further, a stockholder's investment may be adversely affected to the extent that we pay the costs of settlement and damage awards against directors and officers as
required by these indemnification provisions. At present, there is no pending litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought, and we
are not aware of any threatened litigation that may result in claims for indemnification.
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RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
We describe below transactions, since our inception, to which we were a party or will be a party, in which:
•
the amounts involved exceeded or will exceed $120,000; and
•
a director, executive officer, holder of more than 5% of our voting securities or any member of their immediate family had
or will have a direct or indirect material interest.
TANFIELD TRANSACTIONS
Since our formation in January 2009, we have entered into various transactions with Tanfield or its affiliates, as described below. At
the time of each such transaction, (i) Tanfield beneficially owned more than 5% of our common stock, (ii) Roy Stanley, who was Chairman of our board of directors from December 18,
2009 through November 4, 2011, beneficially owned more than 10% of Tanfield's outstanding share capital and was a director of Tanfield, and (iii) Darren Kell, who has been a member of
our board of directors since our formation, was the chief executive officer and a director of Tanfield.
Smith UK acquisition
We acquired our Smith UK business from Tanfield and certain of its subsidiaries, effective January 1, 2011, for a total purchase
price of $15.0 million. We paid Tanfield $750,000 of the purchase price at closing and the remainder is payable in 19 equal monthly installments. The unpaid portion of the purchase price bears
interest at a rate of 4.0% in excess of the base rate established by Barclays Bank PLC from time to time. As of September 30, 2011, we owed Tanfield $8.1 million, which included
the $8.0 million balance of the purchase price and accrued interest, and $0.1 million owed to Tanfield under a transitional services agreement we entered into in connection with the
acquisition. In connection with the closing of our 2011 convertible notes financing, we paid Tanfield $5.6 million of this amount and Tanfield converted $2.0 million of this amount into
a convertible note of like principal amount and a 2011 warrant to purchase 48,148 shares of our common stock. We are obligated to pay the $0.5 million balance, plus accrued interest, in full to
Tanfield upon the completion of this offering.
Tanfield production facility license agreement
Through Smith Europe, we license our 80,000 square foot production facility in Washington, Tyne and Wear, England from Tanfield
pursuant to a license to occupy dated January 1, 2011. Tanfield leases the entire 250,000 square foot facility from a third party. The license to occupy does not create a landlord-tenant
relationship between Smith Europe and Tanfield. Smith Europe pays a fee of £23,500 per month to occupy space at the facility and we guarantee Smith Europe's obligations under the
agreement. The license to occupy expires on December 31, 2013 unless terminated earlier in accordance with its terms.
Tanfield warrant
On August 5, 2009, we issued a five-year warrant to Tanfield, which was amended on December 18, 2009. The
warrant, as amended, provided Tanfield the right to purchase a number of shares of our common stock equal to 49% of (i) the number of shares of common stock issued and vested pursuant to our
2009 Incentive Compensation Plan, (ii) the number of shares of common stock issued to the investors in our Series A financing for amounts invested between $7.5 million and
$10.0 million, (iii) the number of shares of common stock issued to the investors in our Series A financing for amounts invested between $10.0 million and
$15.0 million, provided that such amounts were invested on or prior to August 7, 2009, and (iv) the number of shares of common stock issued to Roy Stanley pursuant to his services
agreement with us. The warrant had an exercise price of $0.01 per
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share
and was exercisable on a cashless basis. Tanfield exercised this warrant on March 12, 2010 for 640,468 shares of our common stock. We and Tanfield terminated this warrant effective
November 4, 2011.
Tanfield license and services agreements
On January 27, 2009, we entered into an agreement with Tanfield Engineering Systems Limited, or Tanfield Engineering, a wholly
owned subsidiary of Tanfield, under which Tanfield Engineering agreed to provide us with certain services and a license to certain intellectual property necessary for our business operations. On
August 5, 2009, we entered into a license agreement with Tanfield Engineering under which Tanfield Engineering licensed to us the exclusive right to develop, test, manufacture, market,
distribute, sell and service electric vehicles in North America under Tanfield's electric vehicle intellectual property (other than trade and service marks). Under the license agreement, we were
required to pay Tanfield an upfront payment of £1.0 million, which was payable in installments, and a royalty equal to 2% of our net sales of commercial electric vehicles until the
upfront payment was paid in full and a royalty of 1% of our net sales of commercial electric vehicles thereafter. We paid Tanfield an aggregate of £1.0 million in upfront payments
and royalties under the license agreement. Additionally, we issued Tanfield 4,409,549 shares of our common stock, which represented 49% of our then-outstanding common stock, as partial
consideration for Tanfield Engineering entering into the license agreement. Tanfield Engineering also performed certain services in support of our business and we paid Tanfield Engineering
$0.4 million for such services. The license and services agreements were terminated, and Smith Europe acquired the licensed intellectual property rights, in connection with the acquisition of
the Smith UK business from Tanfield.
Tanfield letter agreement
In November 2011, we entered into a letter agreement with Tanfield in which Tanfield agreed to not acquire or enter into any derivative
contract that provides Tanfield with the economic benefit of acquiring any shares of our common stock or to make any public announcement of its intention to take any such actions. The letter agreement
also restricts Tanfield's ability to transfer its rights under our amended and restated investor rights agreement in connection with Tanfield's transfer of more than 10% of our outstanding common
stock to a third party unless the third party agrees to abide by the standstill provisions described in the preceding sentence.
EQUITY AND DEBT ISSUANCES
Series C preferred stock issuance
Between November 3, 2011 and November 8, 2011, we issued 2,431,170 shares of our Series C preferred stock in
connection with the conversion of all of our outstanding 2011 convertible notes. We did not receive any additional cash proceeds from the conversion of our 2011 convertible notes into Series C
preferred stock. The following table sets forth for each of our 5% stockholders that converted a convertible note into shares of Series C preferred stock the number of shares received upon
conversion.
Name
Number of Shares
Tanfield Group Plc
160,992
Continental Casualty Company
1,215,636
Potomac Energy Fund LP
226,918
Total:
1,603,546
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2011 convertible notes financing
Between October 7, 2011 and October 31, 2011, we issued and sold $30.0 million in aggregate principal amount of
2011 convertible notes and seven-year warrants to purchase 726,960 shares of our common stock for aggregate proceeds of $30.0 million. The aggregate proceeds consisted of cash
proceeds of $25.2 million, cancellation of the $2.8 million of indebtedness under the senior note and the conversion of approximately $2.0 million of the outstanding balance of
the purchase price we owe to Tanfield in connection with the acquisition of our Smith UK business. Wynston Hill Capital, LLC, or Wynston Hill, which beneficially owned more than 5% of our
outstanding common stock at the time of the transaction, served as our placement agent, and we paid Wynston Hill a fee of $485,189 for such services. The following table sets forth for each of our 5%
stockholders that participated in the offering, the principal amount of the convertible note and the number of shares covered by the warrant received, and the purchase price paid, by such stockholder.
Name
Principal Amount of
Convertible Note
Warrant Shares
Purchase Price
Tanfield Group Plc
$
1,988,388
48,148
$
1,988,388
Continental Casualty Company
15,000,000
363,489
15,000,000
Potomac Energy Fund LP
2,800,000
67,851
2,800,000
Total:
$
19,788,388
479,488
$
19,788,388
Senior note financing
On September 14, 2011, we issued a $2.8 million senior note to Potomac Energy Fund LP, which beneficially owned
more than 5% of our outstanding capital stock at the time of
the transaction. The senior note accrued interest at 8.00% per annum and had a maturity date of December 31, 2011. We exchanged this note in connection with our Series C financing
discussed above.
Series B preferred stock
In February and March 2011, (i) we sold an aggregate of 3,239,202.6576 shares of Series B preferred stock at a purchase
price of $12.04 per share for aggregate cash proceeds of approximately $39.0 million and (ii) we issued an aggregate of 1,569,804.48 shares of Series B preferred stock to holders
of the bridge notes and warrants described below upon the conversion of all but approximately $171,167 (which we repaid in cash) of the bridge notes at the conversion price of $12.04 per share and the
cashless exercise of the outstanding warrants. Wynston Hill, which beneficially owned more than 5% of our outstanding capital stock at the time of the transaction, served as our placement agent, and
we paid Wynston Hill a fee of $1,200,000 for such services.
Bridge note financing
Between March and October 2010, we issued and sold $14.2 million of units, each consisting of a $500,000 principal amount senior
unsecured convertible promissory bridge note, or a bridge note, and a two-year warrant to purchase shares of the class of our equity securities into which the bridge notes were
convertible. The notes accrued interest as a rate of 12% per annum and matured on the earlier of one year from the date of issuance and the consummation of an equity offering in which we receive gross
proceeds of at least $20.0 million. In March 2011, all but approximately $171,167 (which we repaid in cash) of the full principal amount of and accrued and unpaid interest on the bridge notes
was converted into shares of series B preferred stock and each of the warrants was exercised in a cashless transaction for the issuance of shares of Series B preferred stock, as
described above under "—Series B preferred stock." Wynston Hill, which beneficially owned more than 5% of our outstanding capital stock at the time of the transaction, acted as our
placement agent in connection with the issuance of
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the
units, and we paid Wynston Hill a fee of $707,500 for such services. Bruce Shalett, who served on our board of directors from our inception until his resignation in March 2010, was an executive of
Wynston Hill at the time of such transactions.
Series A debentures and common stock
Between March 2009 and January 2010, we issued and sold $11.1 million of units, each consisting of a Series A debenture
with a principal amount of $100,000 and 6,666 shares of our common stock. Wynston Hill, which beneficially owned more than 5% of our outstanding capital stock at the time of the transaction, acted as
our placement agent in connection with the issuance, and we paid Wynston Hill a fee of $555,000 for such services. Bruce Shalett, who served on our board of directors from our inception until his
resignation in March 2010, was an executive of Wynston Hill at the time of such transactions.
Common stock issuances
On January 16, 2009, we issued 797,063 shares of our common stock to Wynston Hill as consideration for financial advice and
consulting services provided to us in connection with our organization and development of our business plan. On that same date, we issued 3,128,257 and 664,220 shares of our common stock to Bryan
Hansel, our Chief Executive Officer, and Robin Mackie, our Chief Technology Officer and Senior Vice President, respectively, in each case as compensation for services provided to us. Of the shares
issued to Mr. Hansel, 1,998,800 were subject to forfeiture if Mr. Hansel was not appointed chairman of our board of directors on or before December 31, 2009. Mr. Hansel
forfeited these 1,998,800 shares, which we then issued to Mr. Stanley on December 18, 2009 upon Mr. Stanley's appointment as chairman of our board of directors.
OTHER TRANSACTIONS
Investor rights agreement
We have entered into an amended and restated investor rights agreement, dated as of November 3, 2011, with the holders of our
preferred stock and certain holders of our common stock, including some of our directors, executive officers and holders of more than five percent of our voting securities and their affiliates. This
agreement provides for certain rights relating to the registration of such stockholders' shares of common stock, including, as applicable, those issued
upon conversion of their Series B or Series C preferred stock. See "Description of Capital Stock—Registration Rights" for additional information.
Right of first refusal and co-sale agreement
We have entered into an amended and restated right of first refusal and co-sale agreement, dated as of November 3,
2011, with the holders of our preferred stock and certain holders of our common stock, including some of our directors, executive officers and holders of more than five percent of our voting
securities and their affiliates, pursuant to which we and the holders of our preferred stock have a right of purchase and co-sale in respect of sales of securities by our common
stockholders party to the agreement. These purchase and co-sale rights do not apply to shares sold pursuant to this offering, and this agreement will terminate on the day prior to the
closing date of this offering.
Voting and drag-along agreement
We have entered into an amended and restated voting and drag-along agreement, dated as of November 3, 2011, with the
holders of our preferred stock and certain holders of our common stock, including some of our directors, executive officers and holders of more than five percent of our voting securities and their
affiliates, pursuant to which, among other things, each of the parties thereto has
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agreed
to vote all of the shares of our capital stock they hold in the manner described therein with respect to the size and composition of our board of directors and certain liquidation events of us,
subject to certain specified exceptions. Additionally, the parties to this agreement have agreed to sell the shares of our capital stock they hold in connection with certain sales of more than 50% of
our outstanding voting stock and to provide the other parties to the agreement the right to sell shares of our capital stock held by such other parties in the event of a sale by any parties to the
agreement of at least 50% of our outstanding voting stock, in each case, subject to certain specified exceptions. The agreement also provides Tanfield with certain approval rights over certain deemed
liquidation events and contains non-competition covenants applicable to each of the stockholder parties to the agreement. This agreement will terminate upon the closing of this offering.
Indemnification agreements
We have entered into indemnification agreements with each of our directors and executive officers. The indemnification agreements and
our certificate of incorporation and by-laws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law. See "Executive
Compensation—Limitation on Liability and Indemnification."
Tooling Edge, LLC service agreement
On December 14, 2009, we entered into a service agreement with Tooling Edge, LLC and Jeff Hansel, a family member of our
Chief Executive Officer, under which Tooling Edge, LLC and Mr. Hansel agreed to provide us with certain consulting services as may be requested by us from time to time, which have
primarily included developing and improving our supply sourcing. From December 2009 until November 2010, we paid Tooling Edge, LLC and Mr. Hansel, collectively, $4,000 per month for
these services, in addition to reimbursement for reasonable expenses incurred in providing the services. In connection with an increase in the services provided under the services agreement, since
November 2010 we have paid them a monthly services fee of $15,000, plus reasonable expense reimbursements.
Roy Stanley services agreement
On December 18, 2009, we entered into a services agreement with Roy Stanley, the former Chairman of our board of directors and
the founder and a director of Tanfield. In consideration of his services as Chairman, we issued to Mr. Stanley 1,998,800 shares of our common stock. We and Mr. Stanley executed an
addendum to this agreement on January 15, 2010, under which Mr. Stanley agreed to provide us with certain additional services focusing on identifying new technology and product portfolio
opportunities. We pay Mr. Stanley £4,000 per month for these additional services.
RELATED PERSON TRANSACTIONS POLICY
Our board of directors has adopted a Related Person Transactions Policy, which governs the review, approval and ratification of
transactions involving us and related persons where the amount involved exceeds $120,000. Related persons include our executive officers, directors, director nominees, 5% stockholders and immediate
family members of such persons, and entities in which one of these persons has a direct or indirect material interest. Under this policy, prior to entering into any related-person transaction, our
general counsel or corporate secretary is to be notified of the facts and circumstances of the proposed transaction, including: (i) the related person's relationship to us and interest in the
transaction; (ii) the material facts of the proposed transaction, including the proposed aggregate value of such transaction or, in the case of indebtedness, the amount of principal that would
be involved; (iii) the benefits to us of the proposed transaction; (iv) if applicable, the availability of other sources of comparable products or services; and (v) an assessment
of whether the proposed
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transaction
is on terms that are comparable to the terms available to an unrelated third party or to employees generally.
The
general counsel or corporate secretary, in consultation with our legal counsel as appropriate, then assesses whether the proposed transaction is a related-person transaction for
purposes of the policy and SEC rules. If the general counsel or corporate secretary determines that the proposed transaction is a related-person transaction, the proposed transaction is then submitted
to the audit committee of our board of directors for its consideration. The audit committee considers all of the relevant facts and circumstances available, including (if applicable) but not limited
to: (i) the benefits to us of the transaction; (ii) the impact of the transaction on a director's independence, in the event such person is a director; (iii) the availability of
other sources for comparable products or services; (iv) the terms of the transaction; and (v) the terms available to unrelated third parties or to employees generally. No member of the
audit committee can participate in any review, consideration or approval of any related-person transaction if such member or any of his or her immediate family members is the related person. The audit
committee approves only those proposed transactions that are in, or are not inconsistent with, our best interests and the best interests of our stockholders, as determined by the audit committee in
good faith. In the event that we become aware of a related-person transaction that has not been previously approved or ratified, a similar process will be undertaken in order to determine if the
existing transaction should continue or be terminated and/or if any disciplinary action is appropriate. Our general counsel or corporate secretary also may develop, implement and maintain from time to
time certain administrative procedures to ensure the effectiveness of this policy.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to the beneficial ownership of our common stock, as of November 8, 2011
by:
•
each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our voting securities;
•
each of our directors;
•
each of our named executive officers;
•
all of our directors and executive officers as a group; and
•
each selling stockholder.
The
number of shares beneficially owned by each stockholder is determined under SEC rules. Under these rules, beneficial ownership includes any shares as to which the individual or
entity has sole or shared voting power or investment power. In addition, these rules provide that an individual or entity beneficially owns any shares issuable upon the exercise of stock options or
warrants held by such person or entity that were exercisable on November 8, 2011 or within 60 days after November 8, 2011; and any reference in the footnotes to this table to
stock options refers only to such options or warrants. "Shares Beneficially Owned Prior to Offering" includes, in addition to the 10,507,929 shares of common stock outstanding as of November 8,
2011, 7,240,149 shares of common stock issuable upon the conversion immediately prior to the closing of this offering of all shares of Series B preferred stock and Series C preferred
stock, each of which has a one-to-one conversion ratio. In computing the percentage ownership of each individual and entity, the number of outstanding shares of common stock
includes, in addition to the 10,507,929 shares outstanding as of November 8, 2011 and the shares of common stock issuable upon the conversion of all of our Series B preferred stock and
Series C preferred stock, any shares subject to options or warrants held by that individual or entity that were exercisable on or within 60 days after November 8, 2011. These
shares are not considered outstanding, however, for the purpose of computing the percentage ownership of any other stockholder. Each of the stockholders listed has sole voting and investment power
with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable. Except as otherwise set forth below, the address of the
beneficial owner is c/o Smith Electric Vehicles Corp., 12200 N.W. Ambassador Drive, Suite 326, Kansas City, Missouri 64163.
Shares Beneficially
Owned Prior to Offering
Shares Beneficially
Owned After Offering
Shares Being
Offered
Name and Address of Beneficial Owner
Number
Percentage
Number
Percentage
5% Stockholders
Tanfield Group Plc
Vigo Centre, Birtley Road
Washington, Tyne and Wear NE38 9DA
United Kingdom(1)
5,259,192
29.55
%
Continental Casualty Company
333 South Wabash Avenue
23 South
Chicago, Illinois 60604(2)
2,824,973
15.60
%
Roy Stanley
16 Graham Park Road
Newcastle upon Tyne NE3 4BH
United Kingdom(3)
1,998,800
11.26
%
Potomac Energy Fund, LP
1105 Market Street, Suite 300
Wilmington, DE 19801(4)
1,283,971
7.21
%
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Shares Beneficially
Owned Prior to Offering
Shares Beneficially
Owned After Offering
Shares Being
Offered
Name and Address of Beneficial Owner
Number
Percentage
Number
Percentage
Directors and Named Executive Officers
Bryan L. Hansel(5)
1,129,457
6.36
%
Paul R. Geist
101,422
*
Kevin Kelly(6)
—
—
—
—
—
Robin J. Mackie
664,220
3.74
%
Ben Kevin Neal(7)
128,344
*
Jacques D. Schira(8)
128,344
*
All of our directors and executive officers as a group (12 persons)
Other Selling Stockholders
Douglas Fleming
25,355
*
*
Represents
beneficial ownership of less than 1.0% of our common stock.
(1)
Consists
of 5,050,017 shares of common stock held of record by Tanfield Group Plc, 160,992 shares of common stock issuable upon the conversion of
shares of Series C preferred stock, and 48,183 shares subject to a currently exercisable warrant. Tanfield may sell a portion of its shares in this offering.
(2)
Consists
of 1,245,848 and 1,215,636 shares of common stock issuable upon the conversion of shares of Series B preferred stock and Series C
preferred stock, respectively, and 363,489 shares subject to a currently exercisable warrant. Continental Casualty Company is a wholly-owned subsidiary of The Continental Corporation, which is a
wholly-owned subsidiary of CNA Financial Corporation. Loews Corporation owns 90% of the outstanding common shares of CNA Financial Corporation. As such, each of The Continental Corporation, CNA
Financial Corporation and Loews Corporation may be deemed to have voting and/or investment power over the 2,461,484 shares of common stock issuable upon the conversion of shares of Series B
preferred stock and Series C preferred stock and the exercise of a warrant held of record by Continental Casualty Company. Each of The Continental Corporation, CNA Financial Corporation and
Loews Corporation disclaims beneficial ownership with respect to such shares.
(3)
Consists
of 1,998,800 shares of common stock held of record by Storm Finance Group Incorporated, 34 North Quay, Douglas, Isle of Man, IM1 4LB.
Mr. Stanley owns 100% of the equity interests in Storm Finance Group Incorporated.
(4)
Consists
of 989,202 and 226,918 shares of common stock issuable upon the conversion of shares of Series B preferred stock and Series C
preferred stock, respectively, and 67,851 shares subject to a currently exercisable warrant.
(5)
Consists
of 829,457 shares of common stock held of record by Mr. Hansel and 300,000 shares of common stock held of record by Hansel (1997) Family
Trust.
(6)
Mr. Kelly
was our Chief Financial Officer until August 15, 2010.
(7)
Consists
of 128,344 shares of common stock issuable upon the exercise of currently exercisable stock options.
(8)
Consists
of 128,344 shares of common stock issuable upon the exercise of currently exercisable stock options.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for shares of our common stock. Future sales of substantial amounts of shares
of our common stock, including shares issued upon the exercise of outstanding stock options, in the public market after this offering, or the possibility of these sales occurring, could adversely
affect the prevailing market price for our common stock from time to time or impair our ability to raise equity capital in the future.
Upon
the closing of this offering, a total of                        shares of common stock will be outstanding, assuming the
conversion of all of our outstanding Series A debentures at
an assumed conversion price of $            , which is 80% of the mid-point of the price range listed on the cover page of this prospectus. Of these shares,
all                        shares
of common stock sold in this offering by us and the selling stockholders, plus any shares sold upon exercise of the underwriters' option to purchase additional shares, will be freely tradable in the
public market without restriction or further registration under the Securities Act, unless these shares are held by "affiliates," as that term is defined in Rule 144 under the Securities Act.
The
remaining shares of common stock will be "restricted securities," as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for
public sale only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rules 144 or 701 under the Securities Act, which are summarized
below.
Subject
to the lock-up agreements described below and the provisions of Rules 144 and 701 under the Securities Act, these restricted securities will be available for
sale in the public market as follows:
Date
Number of
Shares
On the date of this prospectus
—
Between 90 and 180 days (subject to extension) after the date of this prospectus
—
Between 180 and 365 days (subject to extension) after the date of this prospectus
At various times beginning more than 365 days (subject to extension) after the date of this prospectus
Additionally,
the 1,652,688 shares of our common stock that were subject to stock options outstanding as of November 8, 2011 will be eligible for sale 180 days after the
effective date of this offering, subject to extension as described in the section entitled "Underwriting" in this prospectus.
RULE 144
In general, under Rule 144 as currently in effect, once we have been subject to public company reporting requirements for at
least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during 90 days preceding a sale and who has beneficially owned
the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell such shares without complying with the manner of
sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares
proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then such person is entitled to sell such shares without complying with any of the
requirements of Rule 144.
In
general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell upon expiration of the
lock-up agreements described above, within
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any
three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:
•
1% of the number of shares of common stock then outstanding, which will equal
approximately                        shares
immediately after this offering; or
•
the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on
Form 144 with respect to such sale.
Sales
under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to
the availability of current public information about us.
RULE 701
Rule 701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or
contract and who is not deemed to have been an affiliate of our company during the immediately preceding 90 days to sell these shares in reliance upon Rule 144, but without being
required to comply with the public information, holding period, volume limitation, or notice provisions of Rule 144. Rule 701 also permits affiliates of our company to sell their
Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required to wait until
90 days after the date of this prospectus before selling such shares pursuant to Rule 701.
As
of November 8, 2011, options to purchase 1,652,688 shares of our common stock were outstanding. Of those options, 256,688 were vested as of that date.
LOCK-UP AGREEMENTS
We, our executive officers and directors, and the holders of substantially all of our outstanding shares of common and preferred stock
and the holders of substantially all of our currently outstanding options, warrants and convertible debentures have entered into lock-up agreements with the underwriters. Under these
agreements, subject to certain exceptions, we and each of these persons may not, without the prior written approval of UBS Securities LLC and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, offer, sell, contract to sell, pledge, or otherwise dispose of, directly or indirectly, or hedge our common stock or securities convertible into or exchangeable or exercisable for our
common stock, except in the circumstances described below. These restrictions will be in effect for a period of 180 days (or 365 days in the case of Tanfield) after the date of this
prospectus, which period is subject to extension in the circumstances described in the section entitled "Underwriting" in this prospectus. At any time, UBS Securities LLC and Merrill Lynch,
Pierce, Fenner & Smith Incorporated may, in their sole discretion, release some or all the securities from these lock-up agreements.
Notwithstanding
the above, if (i) during the period beginning on the date that is 15 calendar days plus three business days before the last day of the 180-day (or 365-day, in the case of
Tanfield) period described in the paragraph above, or the initial lock-up period, and ends on the last day of the initial lock-up period, we issue an earnings release or material news or a material
event relating to us occurs; or (ii) prior to the expiration of the initial lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the
initial lock-up period, then the restrictions imposed by these lock-up agreements will continue to apply until the expiration of the date that is 15 calendar days plus three business days after the
date on which the issuance of the earnings release or the material news or material event occurs.
The
restrictions set forth above shall not apply to our issuance of shares of our common stock described below:
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•
the registration of the offer and sale of the shares of our common stock described in this prospectus;
•
the issuance by us of shares of common stock upon the exercise or conversion of options, warrants, convertible preferred
stock or convertible debentures disclosed as outstanding in this prospectus; and
•
the issuance to employees, contractors or directors of restricted stock grants or stock options not exercisable during the
lock-up period pursuant to equity incentive plans described in this prospectus.
The
restrictions set forth above shall not apply to the following types of transfers of shares of our common stock, or securities convertible into or exchangeable or exercisable for our
common stock, by any of our directors, executive officers or the holders of our shares or convertible securities in the following circumstances:
•
the sale of our common stock by the selling stockholders in this offering;
•
a bona fide gift; provided that the recipient thereof executes a lock-up agreement for the remainder of the lock-up
period;
•
a disposition to any trust for the direct or indirect benefit of the holder and/or the holder's immediate family;
provided, that (i) such disposition does not involve a disposition for value and (ii) such trust executes a lock-up agreement for the remainder of the lock-up period; and
•
a transaction relating to any of our securities acquired in open market transactions after the completion of this
offering, provided that no filing under Section 16(a) of the Exchange Act is required or voluntarily made in connection with such transactions.
REGISTRATION RIGHTS
Upon completion of this offering, stockholders owning an aggregate
of                        shares of common stock or their transferees will
be entitled to various rights with respect to the registration of these shares under the Securities Act. Registration of these shares under the Securities Act would result in these shares becoming
fully tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. See "Description of Capital
Stock—Registration Rights" for additional information. Shares covered by a registration statement will be eligible for sales in the public market upon the expiration or release from the
terms of the lock-up agreement.
REGISTRATION STATEMENTS
We intend to file a registration statement on Form S-8 under the Securities Act following this offering to
register all of the shares of common stock issued or reserved for issuance under our equity compensation plans and agreements. We expect to file this registration statement as soon as practicable
after this offering. Shares covered by this registration statement will be eligible for sale in the public market, upon the expiration or release from the terms of the lock-up agreements,
and subject to vesting of such shares.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The following is a summary of our capital stock, certain provisions of our certificate of incorporation and by-laws, as
they will be in effect upon the closing of this offering, an investor rights agreement we have entered into with certain of our stockholders, a rights plan we entered into
with                        , or the
rights plan, and certain provisions of the Delaware General Corporation Law. This summary assumes the automatic conversion of all of the outstanding shares of our Series B preferred stock and
Series C preferred stock into shares of our common stock based on a one-to-one conversion ratio. This summary is intended as a summary only and is qualified in its
entirety by reference to our certificate of incorporation, by-laws, investor rights agreement and rights plan, all of which are filed as exhibits to the registration statement
of which this prospectus forms a part, and to the applicable provisions of the Delaware General Corporation Law.
Upon
the closing of this offering, our authorized capital stock will consist of 200,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock,
par value $0.001 per share.
As
of November 8, 2011, we had outstanding:
•
10,507,929 shares of common stock, held of record by 41 stockholders,
•
options to acquire 1,652,688 shares of our common stock, and
•
warrants exercisable for 726,960 shares of our common stock.
COMMON STOCK
Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not
have cumulative voting rights. Any election of directors by our stockholders will be determined by a plurality of the votes cast by the stockholders entitled to vote in the election. Holders of common
stock are entitled to receive ratably any dividends declared by our board of directors, subject to any preferential dividend rights of then-outstanding preferred stock. See "Dividend
Policy."
In
the event of our liquidation, dissolution or winding up, the holders of our common stock are entitled to receive ratably our net assets available for distribution to stockholders
after the payment of all debts and other liabilities and subject to the prior rights of any then-outstanding preferred stock. Holders of common stock have no preemptive, subscription,
redemption or conversion rights.
PREFERRED STOCK
Upon the closing of this offering, no shares of preferred stock will be outstanding and our board of directors will be authorized,
without action by our stockholders, to from time to time designate and issue up to an aggregate of 5,000,000 shares of preferred stock in one or more series. Our board of directors has the discretion
to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of
preferred stock.
The
issuance of preferred stock could have the effect of restricting dividends on our common stock, diluting the voting power of our common stock, impairing the liquidation rights of our
common stock or delaying, deterring or preventing a change in control. Such issuance could have the effect of decreasing the market price of the common stock. The issuance of preferred stock or even
the ability to issue preferred stock could also have the effect of delaying, deterring or preventing a change in control.
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Upon
the closing of this offering, we will be authorized to issue up to            shares of Series A Junior Participating Preferred Stock, par value $0.001 per share, or
Series A junior preferred stock, none of which are issued and outstanding. Each share of Series A junior preferred stock will be entitled, when, as and if declared by our board of
directors, or upon the declaring of any dividend (other than a common stock dividend) payable to the holders of our common stock to a minimum preferential quarterly dividend payment equal to the
greater of (i) $0.001 per share, and (ii) an amount equal to 10,000 times the dividend declared per share of our common stock. Such dividends shall accrue and accumulate starting upon
the date such Series A junior preferred stock were issued, the record date for the preferential dividend payment or the date of the preferential quarterly dividend payment, depending on the
circumstances triggering the dividend payment. In the event of our liquidation, dissolution or winding up, holders of the Series A junior preferred stock will be entitled to a minimum
preferential payment of $10,000 per share (plus any accrued but unpaid dividends, whether or not declared, to the date of payment). Each share of Series A junior preferred stock will have
10,000 votes, and, generally, holders of shares of Series A junior preferred stock and the holders of shares of our common stock will vote together as one class on matters submitted to a vote
of our stockholders. In the event of any merger, consolidation or other transaction in which outstanding shares of our common stock are converted or exchanged, each share of Series A junior
preferred stock will be entitled to receive 10,000 times the amount received per share of common stock. These rights are protected by customary antidilution provisions.
Because
of the nature of the Series A junior preferred stock's dividend, liquidation and voting rights, the value of the one ten-thousandth of a share of
Series A junior preferred stock issuable upon exercise of each right issued under our rights plan should approximate the value of one share of our common stock. Holders of shares of
Series A junior preferred stock have no preemptive, subscription, redemption or conversion rights. See "—Anti-Takeover Considerations—Stockholder rights
plan."
We
currently have no plans to issue any shares of preferred stock.
REGISTRATION RIGHTS
We are party to an amended and restated investor rights agreement that provides that holders
of                        shares of our common
stock, including shares of common stock issuable upon the conversion of our Series B preferred stock and Series C preferred stock in connection with this offering, with the right in
specified circumstances to require us to register their shares under the Securities Act of 1933 for resale to the public. These shares are referred to as registrable securities. The investor rights
agreement terminates on the fifth anniversary of the closing of this offering or, with respect to any holder of registrable securities, if earlier, on the date such holder has disposed of all its
registrable securities. A summary of the registration rights held by holders of registrable securities pursuant to the investor rights agreement follows.
Demand registration rights
Beginning on the earlier of February 10, 2016 and six months following the closing of this offering, holders of at least 30% of
the outstanding registrable securities can, on not more than two occasions, request that we file a registration statement under the Securities Act in order to register all or any part of the
registrable securities held by such holders, subject to certain conditions and limitations. The aggregate registrable securities requested to be registered pursuant to such request must have an
anticipated aggregate public offering price, net of underwriting discounts and commissions, of at least $5,000,000.
If
our board of directors believes in good faith that it would be materially detrimental to us to proceed with a registration at the time the demand is made, we may delay the
registration twice in any 12-month period for a period not to exceed 90 days. Also, if the holders of registrable securities
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requesting
registration request that the shares be offered for distribution through an underwritten offering, we may reduce the number of registrable securities to be registered upon the advice of the
underwriters for the offering. If shares of our stock requested to be included in a registration must be excluded pursuant to the underwriters' advice, we will generally register a pro rata portion of
the shares requested to be registered.
Piggyback registration rights
Subject to certain limitations, holders of registration rights pursuant to the amended and restated investor rights agreement have
unlimited rights to request that their registrable securities be included in any registration of our common stock that we initiate. However, these holders have no registration rights with respect to
registrations relating solely to employee benefit plans or registrations on certain registration statement forms. The holders of piggyback registration rights have waived their rights to include any
of their registrable securities in this offering.
Form S-3 registration rights
After we have qualified for registration on Form S-3, which will not occur until at least 12 months after we
have become a public reporting company, holders of at least 10% of the outstanding registrable securities may request in writing that we effect registration of their shares on
Form S-3, provided that the offering proceeds of the shares proposed to be registered on behalf of our stockholders, net of underwriting discounts and commissions, in each
registration is at least $3,000,000.
If
our board of directors believes in good faith that it would be materially detrimental to us to proceed with an S-3 registration at the time the demand is made, we may
delay the registration twice in any 12-month period for a period not to exceed 90 days. In addition, we are not required to make any registration on Form S-3
under the amended and restated investor rights agreement if we have effected another registration pursuant to the Form S-3 registration rights on behalf of the holders of
registrable securities within six months prior to the request.
Transferability
The registration rights are generally transferable to affiliates and any transferee who acquires at least 250,000 shares of registrable
securities from the transferor. The letter agreement we entered into with Tanfield restricts Tanfield's ability to transfer its rights under the investor rights agreement to a third party in
connection with any transfer by Tanfield of 10% or more of our outstanding common stock unless such third party agrees to abide by the standstill provisions set forth in the letter agreement. See
"Relationships and Related Person Transactions—Tanfield Transactions—Tanfield letter agreement."
Expenses
Generally, we are required to bear all registration and selling expenses incurred in connection with the demand, piggyback and
Form S-3 registrations described above, other than underwriting discounts and commissions. We are also required to bear the reasonable fees and expenses, not to exceed $50,000, of
one counsel for the selling stockholders in each registration.
ANTI-TAKEOVER CONSIDERATIONS
Our certificate of incorporation, by-laws and rights plan, all of which will be in effect upon the closing of this
offering, contain certain provisions that could have the effect of delaying, deterring or preventing another party from acquiring control of us. These provisions and certain provisions of Delaware
law, which are summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed, in part, to encourage persons seeking to
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acquire
control of us to negotiate first with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate more favorable terms with an unfriendly
or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us. It is possible, however, that these provisions could make it more difficult to accomplish transactions that
stockholders might otherwise deem to be in their best interests.
Provisions of our certificate of incorporation and by-laws
•
Undesignated preferred stock.
As discussed above, our
board of directors has the ability to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions
may have the effect of deterring hostile takeovers or delaying changes in control or management of our company.
•
Limits on ability of stockholders to act by written consent or call a special
meeting.
Our certificate of incorporation provides that our stockholders may not act by written consent, which may lengthen the amount
of time required to take stockholder actions. As a result, a holder controlling a majority of our capital stock would not be able to amend our by-laws or remove directors without holding a
meeting of our stockholders called in accordance with our by-laws.
Additionally,
our by-laws provide that special meetings of stockholders may be called only by the chairperson of the board, our chief executive officer or our board of directors.
Stockholders may not call a special meeting, which may delay the ability of our stockholders to force consideration of a proposal or for holders controlling a majority of our capital stock to take any
action, including the removal of directors.
•
Requirements for advance notification of stockholder nominations and
proposals.
Our by-laws establish advance notice procedures with respect to stockholder proposals and the nomination of
candidates for election as directors, other than nominations made by or at the direction of our board of directors or a committee of our board of directors. These provisions may have the effect of
precluding the conduct of certain business at a meeting if the proper procedures are not followed. These provisions also may discourage or deter a potential acquirer from conducting a solicitation of
proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company.
•
Board classification.
Following the closing of this
offering, our board of directors will be divided into three classes, one class of which is elected each year by our stockholders. The directors in each class will serve for a three-year
term. For more information on our classified board, see "Management—Board of Directors." A third party may be discouraged from making a tender offer or otherwise attempting to obtain
control of us as it is it more difficult and time-consuming for stockholders to replace a majority of the directors on a classified board.
•
No cumulative voting.
Our certificate of incorporation and
by-laws do not permit cumulative voting in the election of directors. Cumulative voting allows a stockholder to vote a portion or all of its shares for one or more candidates for seats on
the board of directors. Without cumulative voting, a minority stockholder may not be able to gain as many seats on our board of directors as the stockholder would be able to gain if cumulative voting
were permitted, which makes it more difficult for a minority stockholder to influence our board's decision regarding a takeover.
•
Amendment of charter provisions.
The amendment of the
provisions of our certificate of incorporation described above and the amendment by stockholders of the by-laws described above require approval by holders of at least 75% of our
outstanding capital stock entitled to vote generally in the election of directors.
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Stockholder rights plan
Our board of directors has adopted a rights plan that will be effective upon the closing of this offering and has declared a dividend
of one preferred stock purchase right, or a right, for each outstanding share of our common stock held of record as of the close of business on the closing date of this offering. The rights are not
intended to prevent a takeover of us and will not do so; however, the rights have certain anti-takeover effects. The rights will cause substantial dilution to a person or group that
attempts to acquire us on terms not approved by our board and without conditioning the offer on a substantial number of rights being acquired. Accordingly, the existence of the rights may deter
certain acquirors from making takeover proposals or tender offers. However, the rights are intended to help ensure that our stockholders receive fair and equal treatment in the event of any proposed
takeover of us. Our entry into the rights plan was not in response to any
specific takeover threat or proposal, but is a precaution taken to protect the rights of our stockholders.
•
The rights.
Each right initially represents the right to
purchase, for $            , which we refer to as the purchase price, one ten-thousandth of a share of the Series A junior preferred stock. The rights will attach to all shares
of our common stock issued after the closing of this offering and prior to the rights becoming exercisable. Prior to the distribution date referred to below, the rights will be represented only by the
stock certificates (or book entry records) evidencing shares of our common stock to which the rights are attached. Prior to exercise, a right does not give its holder any rights as stockholder.
•
Exercisability.
The rights are not exercisable until the
occurrence of a distribution date. After the distribution date, the rights may be transferred on the books and records of the rights agent as provided in the rights agreement. A distribution date is
the earlier of: (i) the 10th day after public announcement that any person or group has become an acquiring person and (ii) the 10th business day after the commencement of
a tender or exchange offer by a person or group (other than us, any of our subsidiaries or any of our or our subsidiaries' employee benefit or stock ownership plans) for 15% or more of the
then-outstanding shares of our common stock.
An
acquiring person, generally, is a person or group (other than us, any of our subsidiaries or any of our or our subsidiaries' employee benefit or stock ownership plans) that has become the
beneficial owner of 15% or more of the then-outstanding shares of our common stock. However, no such person or group will be deemed an acquiring person if:
•
the person or group beneficially owns 15.0% or more of the outstanding shares of our common stock as of the closing date
of this offering and does not acquire any additional shares (except in connection with any of the events referred to in clauses (i) through (iii) below);
•
the person or group becomes the beneficial owner of 15% or more of our outstanding common stock after the closing of this
offering solely as a result of (i) a reduction in the number of shares of outstanding common stock, (ii) the exercise of, or lapse of restrictions on, any options, warrants, rights or
similar interests granted by us to our directors, officers or employees, or (iii) any unilateral grant of any security by us, and, in any such case does not acquire any additional shares of our
common stock (except through the subsequent occurrence of any of the events referred to in the preceding clauses (i) through (iii)); or
•
our board of directors determines that the person or group has become an acquiring person inadvertently and the person or
group promptly divests (or enters into an irrevocable commitment to divest) enough common stock to reduce its beneficial ownership percentage below 15%.
After
a distribution date, any rights beneficially owned by an acquiring person (or any transferee of the acquiring person) will become null and void and may not be exercised. All other rights
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holders
will have the right to receive, upon exercise of their rights and payment of the purchase price, that number of shares of our Series A junior preferred stock having a market value equal
to twice the purchase price.
•
Exchange.
At any time after any person or group has become
an acquiring person (but before any person or group becomes the beneficial owner of 50% or more of our common stock), our board may, at its option, elect to exchange all or part of the outstanding and
exercisable rights (other than the rights beneficially owned by the acquiring person or any transferee of an acquiring person) at an exchange ratio of one share of common stock per right, subject to
adjustment as set forth in the rights agreement. The rights cannot be exercised following our board's determination to effect a rights exchange.
•
Redemption.
At any time before a person or group becomes
an acquiring person, our board of directors may, at its option, redeem all, but not less than all, of the then-outstanding rights at a redemption price of $0.0001 per right, subject to
adjustment as set forth in the rights agreement. The rights cannot be exercised following the board's determination to redeem the rights.
•
Expiration.
Unless earlier exercised, the rights (and the
rights agreement) will expire on the earliest of (i) the tenth anniversary of the closing date of this offering, (ii) the redemption of the rights and (iii) any exchange of the
rights.
•
Amendments.
Our board of directors may amend or supplement
the rights agreement without the consent of the rights holders at any time prior to the distribution date. After the distribution date, without the consent of the rights holders, the board may amend
or supplement the rights agreement only to cure an ambiguity, alter time period provisions, correct inconsistent provisions or make other changes that do not adversely affect any rights holder.
•
Anti-Dilution Provisions.
Our board may adjust
the purchase price, the exchange ratio, the redemption price, the number of shares of Series A junior preferred stock issuable upon exercise of the rights and the number of outstanding rights
to prevent dilution that may occur as a result of certain events, including among others, a stock dividend, a stock split or a reclassification of our common stock. Subject to certain limited
exceptions, no adjustments to the purchase price of less than 1% will be made.
Delaware anti-takeover statute
We are subject to the provisions of Section 203 of the Delaware General Corporation Law regulating corporate takeovers. In
general, Section 203 prohibits a publicly held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three
years following the date the person became an interested stockholder unless:
•
prior to the date of the transaction, the board of directors of the corporation approved either the business combination
or the transaction which resulted in the stockholder becoming an interested stockholder;
•
upon completion of the transaction that 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, calculated as provided under Section 203; or
•
at or subsequent to the date of the transaction, the business combination is approved by the board of directors of the
corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock which
is not owned by the interested stockholder.
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Generally,
a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder
is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own, 15% or more of a corporation's outstanding
voting stock. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We also anticipate
that Section 203 may discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders.
DELAWARE AS SOLE AND EXCLUSIVE FORUM
Our certificate of incorporation provides that the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for
(i) any derivative action or proceeding brought on behalf us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to us or our
stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law or our amended and restated certificate of incorporation or
amended and restated by-laws or (iv) any action asserting a claim against us governed by the internal affairs doctrine, in each case, except to the extent otherwise agreed to by our board of
directors or to the extent personal jurisdiction cannot be obtained over an indispensable party to the action. As a result, any action brought by any of our stockholders with regard to any of these
matters will need to be filed in the Court of Chancery of the State of Delaware and cannot be filed in any other jurisdiction. The amendment of this provision of our certificate of incorporation
requires approval by holders of at least 75% of our outstanding capital stock entitled to vote generally in the election of directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common and preferred stock will be Broadridge Corporate Issuer Solutions, Inc.
THE NASDAQ GLOBAL MARKET
We have applied to have our common stock listed on The Nasdaq Global Market under the symbol "SMTH."
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The following is a summary of the material United States federal income tax and estate tax consequences of the ownership and
disposition of our common stock to non-United States holders, but does not purport to be a complete analysis of all of the potential tax considerations relating thereto. This summary is
based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Code, Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date
hereof. These authorities may be changed, possibly retroactively, so as to result in United States federal income tax or estate tax consequences different from those set forth below. We have not
sought any ruling from the Internal Revenue Service, or the IRS, with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS
will agree with such statements and conclusions.
This
summary also does not address the tax considerations arising under the laws of any United States state or locality or any non-United States jurisdiction or under United
States federal gift and estate tax laws, except to the limited extent below. In addition, this discussion does not address tax
considerations applicable to an investor's particular circumstances or to investors that may be subject to special tax rules, including, without limitation:
•
banks, insurance companies or other financial institutions;
•
persons subject to the alternative minimum tax;
•
tax-exempt organizations;
•
dealers in securities or currencies;
•
traders in securities that elect to use a mark-to-market method of accounting for their securities
holdings;
•
persons that own, or are deemed to own, more than five percent of our capital stock (except to the extent specifically set
forth below);
•
certain former citizens or long-term residents of the United States;
•
persons who hold our common stock as a position in a hedging transaction, "straddle," "conversion transaction" or other
risk reduction transaction;
•
persons who do not hold our common stock as a capital asset within the meaning of Section 1221 of the Code
(generally, for investment purposes); or
•
persons deemed to sell our common stock under the constructive sale provisions of the Code.
In
addition, if a partnership or entity classified as a partnership for United States federal income tax purposes holds our common stock, the tax treatment of a partner generally will
depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships that hold our common stock, and partners in such partnerships, should consult their tax
advisors.
You are urged to consult your tax advisor with respect to the application of the United States federal income tax laws to your particular situation, as well as
any tax consequences of the purchase, ownership and disposition of our common stock arising under the United States federal estate or gift tax rules or under the laws of any United States state or
local or any non-United States or other taxing jurisdiction or under any applicable tax treaty.
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NON-UNITED STATES HOLDER DEFINED
For purposes of this discussion, you are a non-United States holder if you are any holder other
than:
•
an individual citizen or resident of the United States;
•
a corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the
United States, any State thereof or the District of Columbia;
•
an estate whose income is subject to United States federal income tax regardless of its source; or
•
a trust (x) whose administration is subject to the primary supervision of a United States court and which has one
or more United States persons who have the authority to control all substantial decisions of the trust or (y) which has made an election to be treated as a United States person.
DISTRIBUTIONS
If we make distributions on our common stock, those payments will constitute dividends for United States tax purposes to the extent
paid from our current or accumulated earnings and profits, as determined under United States federal income tax principles. To the extent those distributions exceed both our current and our
accumulated earnings and profits, they will constitute a return of capital and will first reduce your basis in our common stock, but not below zero, and then will be treated as gain from the sale of
stock (as discussed further below).
Any
dividend paid to a non-United States holder generally will be subject to United States withholding tax either at a rate of 30% of the gross amount of the dividend or such
lower rate as may be specified by an applicable income tax treaty. In order to receive a reduced treaty rate, you must provide us with an IRS Form W-8BEN or other appropriate
version of IRS Form W-8 certifying qualification for the reduced rate.
Dividends
received by you that are effectively connected with your conduct of a United States trade or business generally are exempt from such withholding tax. In order to obtain this
exemption, you must provide us with an IRS Form W-8ECI or other applicable IRS Form W-8 properly certifying such exemption. Such effectively connected dividends,
although not subject to withholding tax, are taxed at the same graduated rates applicable to United States persons, net of certain deductions and credits, subject to an applicable income tax treaty
providing otherwise. In addition, if you are a corporate non-United States holder, dividends you receive that are effectively connected with your conduct of a United States trade or
business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty.
If
you do not timely provide us with the required certification for the exemption from or reduction of United States withholding tax, but are eligible for a reduced rate of withholding
tax pursuant to a tax treaty, you may be able to obtain a refund of any excess amounts currently withheld if you file an appropriate claim for refund with the IRS.
GAIN ON SALE OR OTHER DISPOSITION OF COMMON STOCK
You generally will not be required to pay United States federal income tax on any gain realized upon the sale or other disposition of
our common stock unless:
•
the gain is effectively connected with your conduct of a United States trade or business (and, if an income tax treaty
applies, the gain is attributable to a permanent establishment maintained by you in the United States), in which case you will be required to pay tax on the net gain derived from the sale under
regular graduated United States federal income tax rates, and for a
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non-United
States holder that is a corporation, such non-United States holder may be subject to the branch profits tax at a 30% rate or such lower rate as may be specified by
an applicable income tax treaty;
•
you are an individual who is present in the United States for a period or periods aggregating 183 days or more
during the calendar year in which the sale or disposition occurs and certain other conditions are met, in which case you will be required to pay a flat 30% tax on the gain derived from the sale, which
tax may be offset by United States source capital losses (even though you are not considered a resident of the United States) (subject to applicable income tax or other treaties); or
•
our common stock constitutes a United States real property interest by reason of our status as a "United States real
property holding corporation" for United States federal income tax purposes, or a USRPHC, at any time within the shorter of the five-year period preceding the disposition or your holding
period for our common stock. We believe that we are not currently and will not become a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our
United States real property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC,
however, as long as our common stock is regularly traded on an established securities market, such common stock will be treated as United States real property interests only if you actually or
constructively hold more than five percent of such regularly traded common stock at any time during the applicable period that is specified in the Code.
UNITED STATES FEDERAL ESTATE TAX
Our common stock held (or treated as held) by an individual non-United States holder at the time of death will be included
in such holder's gross estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise, and therefore may be subject to United States federal estate
tax.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Generally, we must report annually to the IRS the amount of dividends paid to you, your name and address, and the amount of tax
withheld, if any. A similar report will be sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in your country of
residence.
Payments
of dividends or of proceeds on the disposition of stock made to you may be subject to additional information reporting and backup withholding at a current rate of 28% unless you
establish an exemption, for example by properly certifying your non-United States status on a Form W-8BEN or another appropriate version of IRS
Form W-8. Notwithstanding the foregoing, backup withholding and information reporting may apply if either we or our paying agent has actual knowledge, or reason to know, that you
are a United States person.
Information
reporting requirements, but not backup withholding, will also generally apply to payments of the proceeds of a sale, exchange or other disposition of our common stock by
non-U.S. offices of U.S. brokers or non-U.S. brokers with certain types of
relationships to the United States unless the non-United States holder establishes an exemption.
Backup
withholding is not an additional tax; rather, the United States income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.
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RECENTLY ENACTED LEGISLATION AFFECTING TAXATION OF OUR COMMON STOCK HELD BY OR THROUGH FOREIGN ENTITIES
Recently enacted legislation generally will impose a United States federal withholding tax of 30% on dividends and the gross proceeds
of a disposition of our common stock paid after December 31, 2012 to a "foreign financial institution" (as specially defined under these rules), unless such institution enters into an agreement
with the United States government to withhold on certain payments and to collect and provide to the United States tax authorities substantial information regarding United States account holders of
such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with United States owners). The legislation also will
generally impose a United States federal withholding tax of 30% on dividends and the gross proceeds of a disposition of our common stock paid after December 31, 2012 to a
non-financial foreign entity unless such entity provides the withholding agent with a certification identifying the direct and indirect United States owners of the entity. Under certain
circumstances, a non-United States holder might be eligible for refunds or credits of such taxes. Prospective investors are encouraged to consult with their own tax advisors regarding the
possible implications of this legislation on their investment in our common stock.
The preceding discussion of United States federal tax considerations for non-United States holders is for general information only. It is not tax
advice. Each prospective investor should consult its own tax advisor regarding the particular United States federal, state and local and non-United States tax consequences of purchasing,
holding and disposing of our common stock, including the consequences of any proposed change in applicable laws.
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UNDERWRITING
We are offering the shares of our common stock described in this prospectus through the underwriters named below. UBS
Securities LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as joint book-running managers of this offering and as the representatives of the
underwriters. We have entered into an underwriting agreement with the representatives. Subject to the terms and condition of the underwriting agreement, each of the underwriters has severally agreed
to purchase the number of shares of common stock listed next to its name in the following table.
Underwriters
Number of shares
UBS Securities LLC
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Total
The
underwriting agreement provides that the underwriters must buy all of the shares if they buy any of them. However, the underwriters are not required to take or pay for the shares
covered by the underwriters' over-allotment option described below.
Our
common stock is offered subject to a number of conditions, including:
•
receipt and acceptance of our common stock by the underwriters; and
•
the underwriters' right to reject orders in whole or in part.
We
have been advised by the representatives that the underwriters intend to make a market in our common stock but that they are not obligated to do so and may discontinue making a market
at any time without notice.
In
connection with this offering, certain of the underwriters or securities dealers may distribute prospectuses electronically.
OVER-ALLOTMENT OPTION
We have granted the underwriters an option to buy up to an aggregate
of                        additional shares of our common stock. The
underwriters may exercise this option solely for the purpose of covering over-allotments, if any, made in connection with this offering. The underwriters have 30 days from the date
of this prospectus to exercise this option. If the underwriters exercise this option, they will each purchase additional shares approximately in proportion to the amounts specified in the table above.
COMMISSIONS AND DISCOUNTS
Shares sold by the underwriters to the public will initially be offered at the initial offering price set forth on the cover of this
prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $            per share from the initial public offering price. Sales of shares made
outside
of the United States may be made by affiliates of the underwriters. If all of the shares are not sold at the initial public offering price, the representatives may change the offering price and the
other selling terms. Upon execution of the underwriting agreement, the underwriters will be obligated to purchase the shares at the prices and upon the terms stated therein.
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The
following table shows the per share and total underwriting discounts and commissions we will pay to the underwriters assuming both no exercise and full exercise of the underwriters'
option to purchase up to                        additional shares.
No exercise
Full exercise
Per share
$
$
Total
$
$
We
estimate that the total expenses of this offering payable by us, not including the underwriting discounts and commissions, will be approximately $            .
NO SALES OF SIMILAR SECURITIES
We, our executive officers and directors, and the holders of substantially all of our outstanding shares of common and preferred stock
and the holders of substantially all of our currently outstanding options, warrants and convertible debentures have entered into lock-up agreements with the underwriters. Under these
agreements, subject to certain exceptions, we and each of these persons may not, without the prior written approval of UBS Securities LLC and Merrill Lynch, Pierce, Fenner & Smith
Incorporated offer, sell, contract to sell, pledge, or otherwise dispose of, directly or indirectly, or hedge our common stock or securities convertible into or exchangeable or exercisable for our
common stock, except in the circumstances described below. These restrictions will be in effect for a period of 180 days (or 365 days in the case of Tanfield) after the date of this
prospectus, which period is subject to extension in the circumstances described in the paragraph below. At any time, UBS Securities LLC and Merrill Lynch, Pierce, Fenner & Smith
Incorporated may, in their sole discretion, release some or all the securities from these lock-up agreements.
Notwithstanding
the above, if (i) during the period beginning on the date that is 15 calendar days plus three business days before the last day of the 180-day (or
365-day, in the case of Tanfield) period described in the paragraph above, or the initial lock-up period, and ends on the last day of the initial lock-up period, we
issue an earnings release or material news or a material event relating to us occurs; or (ii) prior to the expiration of the initial
lock-up period, we announce that we will release earnings results during the 16-day period beginning on the last day of the initial lock-up period, then the
restrictions imposed by these lock-up agreements will continue to apply until the expiration of the date that is 15 calendar days plus three business days after the date on which the
issuance of the earnings release or the material news or material event occurs.
The
restrictions set forth above shall not apply to our issuance of shares of our common stock described below:
•
the registration of the offer and sale of the shares of our common stock described in this prospectus;
•
the issuance by us of shares of common stock upon the exercise or conversion of options, warrants, convertible preferred
stock or convertible debentures disclosed as outstanding in this prospectus; and
•
the issuance to employees, contractors or directors of restricted stock grants or stock options not exercisable during the
lock-up period pursuant to equity incentive plans described in this prospectus.
The
restrictions set forth above shall not apply to the following types of transfers of shares of our common stock, or securities convertible into or exchangeable or exercisable for our
common stock, by
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any
of our directors, executive officers or the holders of our shares or convertible securities in the following circumstances:
•
the sale of our common stock by the selling stockholders in this offering;
•
a bona fide gift; provided that the recipient thereof executes a lock-up agreement for the remainder of the
lock-up period;
•
a disposition to any trust for the direct or indirect benefit of the holder and/or the holder's immediate family;
provided, that (i) such disposition does not involve a disposition for value and (ii) such trust executes a lock-up agreement for the remainder of the lock-up
period; and
•
a transaction relating to any of our securities acquired in open market transactions after the completion of this
offering, provided that no filing under Section 16(a) of the Exchange Act is required or voluntarily made in connection with such transactions.
INDEMNIFICATION
We have agreed to indemnify the several underwriters against certain liabilities, including certain liabilities under the Securities
Act. If we are unable to provide this indemnification, we have agreed to contribute to payments the underwriters may be required to make in respect of those liabilities.
NASDAQ GLOBAL MARKET LISTING
We have applied to list our common stock on The Nasdaq Global Market under the symbol "SMTH."
PRICE STABILIZATION, SHORT POSITIONS
In connection with this offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of
our common stock, including:
•
stabilizing transactions;
•
short sales;
•
purchases to cover positions created by short sales;
•
imposition of penalty bids; and
•
syndicate covering transactions.
Stabilizing
transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our common stock while this offering is in
progress. These transactions may also include making short sales of our common stock, which involve the sale by the underwriters of a greater number of shares of common stock than they are required to
purchase in this offering and purchasing shares of common stock on the open market to cover short positions created by short sales. Short sales may be "covered short sales," which are short positions
in an amount not greater than the underwriters' over-allotment option referred to above, or may be "naked short sales," which are short positions in excess of that amount.
The
underwriters may close out any covered short position by either exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market.
In making this determination, the underwriters will consider, among other things, the price of shares
available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option.
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Naked
short sales are in excess of the over-allotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short
position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors
who purchased in this offering.
The
underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the
representatives have repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions.
As
a result of these activities, the price of our common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be
discontinued by the underwriters at any time. The underwriters may carry out these transactions on The Nasdaq Global Market, in the over-the-counter market or otherwise.
DETERMINATION OF OFFERING PRICE
Prior to this offering, there was no public market for our common stock. The initial public offering price will be determined by
negotiation by us and the representatives of the underwriters. The principal factors to be considered in determining the initial public offering price include:
•
the information set forth in this prospectus and otherwise available to representatives;
•
our history and prospects and the history and prospects for the industry in which we compete;
•
our past and present financial performance and an assessment of our management;
•
our prospects for future earnings and the present state of our development;
•
the general condition of the securities markets at the time of this offering;
•
the recent market prices of, and demand for, publicly-traded common stock of generally comparable companies; and
•
other factors deemed relevant by the underwriters and us.
AFFILIATIONS
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may
include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The
underwriters and their respective affiliates may from time to time in the future engage with us and perform services for us in the ordinary course of their business for which they will receive
customary fees and expenses. In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively
trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment
and securities activities may involve securities and/or instruments of us or our subsidiaries. The underwriters and their respective affiliates may also make investment recommendations and/or publish
or express independent research views in respect of these securities or
instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in these securities and instruments.
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NOTICE TO INVESTORS
Notice to prospective investors in the European Economic Area
In relation to each Member State of the European Economic Area, or EEA, which has implemented the Prospectus Directive (each, a
"Relevant Member State"), with effect from, and including, the date on which the Prospectus Directive is implemented in that Relevant Member State (the "Relevant Implementation Date"), an offer to the
public of our securities which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State, except that, with effect from, and including, the Relevant
Implementation Date, an offer to the public in that Relevant Member State of our securities may be made at any time under the following exemptions under the Prospectus Directive, if they have been
implemented in that Relevant Member State:
•
to legal entities which are authorized or regulated to operate in the financial markets, or, if not so authorized or
regulated, whose corporate purpose is solely to invest in our securities;
•
to any legal entity which has two or more of: (i) an average of at least 250 employees during the last (or, in
Sweden, the last two) financial year(s); (ii) a total balance sheet of more than €43,000,000 and (iii) an annual net turnover of more than €50,000,000, as
shown in its last (or, in Sweden, the last two) annual or consolidated accounts;
•
to fewer than 100 natural or legal persons or, if the Relevant Member State has implemented the relevant provision of the
2010 PD Amending Directive, 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the representative for any
such offer; or
•
in any other circumstances falling within Article 3(2) of the Prospectus Directive provided that no such offer of
our securities shall result in a requirement for the publication by us or any underwriter or agent of a prospectus pursuant to Article 3 of the Prospectus Directive.
As
used above, the expression "offered to the public" in relation to any of our securities in any Relevant Member State means the communication in any form and by any means of sufficient
information on the terms of the offer and our securities to be offered so as to enable an investor to decide to purchase or subscribe for our securities, as the same may be varied in that Member State
by any measure implementing the Prospectus Directive in that Member State and the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending
Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in each Relevant Member State; and the expression "2010 PD Amending Directive" means
Directive 2010/73/EU. The EEA selling restriction is in addition to any other selling restrictions set out in this prospectus.
Notice to prospective investors in the United Kingdom
This prospectus is only being distributed to and is only directed at: (i) persons who are outside the United Kingdom;
(ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"); or (iii) high net worth
companies, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons falling within (i)-(iii) together being
referred to as "relevant persons"). The shares are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such shares will be engaged in only with,
relevant persons. Any person who is not a relevant person should not act or rely on this prospectus or any of its contents.
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Notice to prospective investors in Switzerland
The prospectus does not constitute an issue prospectus pursuant to Article 652a or Article 1156 of the Swiss Code of
Obligations ("CO") and the shares will not be listed on the SIX Swiss Exchange. Therefore, the prospectus may not comply with the disclosure standards of the CO and/or the listing rules (including any
prospectus schemes) of the SIX Swiss Exchange. Accordingly, the shares may not be offered to the public in or from Switzerland, but only to a selected and limited circle of investors, which do not
subscribe to the shares with a view to distribution.
Notice to prospective investors in Australia
This prospectus is not a formal disclosure document and has not been, nor will be, lodged with the Australian Securities and
Investments Commission. It does not purport to contain all information that an investor or their professional advisers would expect to find in a prospectus or other disclosure document (as defined in
the Corporations Act 2001 (Australia)) for the purposes of Part 6D.2 of the Corporations Act 2001 (Australia) or in a product disclosure statement for the purposes of Part 7.9 of the
Corporations Act 2001 (Australia), in either case, in relation to the securities.
The
securities are not being offered in Australia to "retail clients" as defined in sections 761G and 761GA of the Corporations Act 2001 (Australia). This offering is being made
in Australia solely to "wholesale clients" for the purposes of section 761G of the Corporations Act 2001 (Australia) and, as such, no prospectus, product disclosure statement or other
disclosure document in relation to the securities has been, or will be, prepared.
This
prospectus does not constitute an offer in Australia other than to wholesale clients. By submitting an application for our securities, you represent and warrant to us that you are a
wholesale client for the purposes of section 761G of the Corporations Act 2001 (Australia). If any recipient of this prospectus is not a wholesale client, no offer of, or invitation to apply
for, our securities shall be deemed to be made to such recipient and no applications for our securities will be accepted from such recipient. Any offer to a recipient in Australia, and any agreement
arising from acceptance of such offer, is personal and may only be accepted by the recipient. In addition, by applying for our securities
you undertake to us that, for a period of 12 months from the date of issue of the securities, you will not transfer any interest in the securities to any person in Australia other than to a
wholesale client.
Notice to prospective investors in Hong Kong
Our securities may not be offered or sold in Hong Kong, by means of this prospectus or any document other than (i) to
"professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (ii) in circumstances which do not
constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (iii) in other circumstances which do not result in the document being a
"prospectus" within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong). No advertisement, invitation or document relating to our securities may be issued or may be in the
possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere) which is directed at, or the contents of which are likely to be accessed or read by, the public in
Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the securities which are or are intended to be disposed of only to persons outside Hong Kong
or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Notice to prospective investors in Japan
Our securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the "Financial
Instruments and Exchange Law") and our securities will not be
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offered
or sold, directly or indirectly, in Japan, or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other
entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan, or to a resident of Japan, except pursuant to an exemption from the
registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.
Notice to prospective investors in Singapore
This document has not been registered as a prospectus with the Monetary Authority of Singapore and in Singapore, the offer and sale of
our securities is made pursuant to exemptions provided in sections 274 and 275 of the Securities and Futures Act, Chapter 289 of Singapore ("SFA"). Accordingly, this prospectus and any
other document or material in connection with the offer or sale, or invitation for subscription or purchase, of our securities may not be circulated or distributed, nor may our securities be offered
or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor as defined in
Section 4A of the SFA pursuant to Section 274 of the SFA, (ii) to a relevant person as defined in section 275(2) of the SFA pursuant to Section 275(1) of the SFA, or
any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA, or (iii) otherwise pursuant to, and in accordance
with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with the conditions (if any) set forth in the SFA. Moreover, this document is not a prospectus as
defined in the SFA. Accordingly, statutory liability under the SFA in relation to the content of prospectuses would not apply. Prospective investors in Singapore should consider carefully whether an
investment in our securities is suitable for them.
Where
our securities are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
•
by a corporation (which is not an accredited investor as defined in Section 4A of the SFA) the sole business of
which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
•
for a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each
beneficiary of the trust is an individual who is an accredited investor;
•
shares of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be
transferable for six months after that corporation or that trust has acquired the shares under Section 275 of the SFA, except:
•
to an institutional investor, for corporations under Section 274 of the SFA, or to a relevant person defined in
Section 275(2) of the SFA, or any person pursuant to an offer that is made on terms that such shares of that corporation or such rights and interest in that trust are acquired at a
consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and
further for corporations, in accordance with the conditions, specified in Section 275 of the SFA;
•
where no consideration is given for the transfer; or
•
where the transfer is by operation of law.
In
addition, investors in Singapore should note that the securities acquired by them are subject to resale and transfer restrictions specified under Section 276 of the SFA, and
they, therefore, should seek their own legal advice before effecting any resale or transfer of their securities.
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Notice to prospective investors in the Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority
("DFSA"). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person.
The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth
herein and has no responsibility for the prospectus . The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares
offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
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LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed upon for us by Covington & Burling LLP,
Washington, DC. Sidley Austin LLP, Palo Alto, California, has acted as counsel to the underwriters in connection with certain legal matters related to this offering.
EXPERTS
The combined financial statements of Smith Electric Vehicles Corp. as of December 31, 2010 and for the year then ended included
in this prospectus have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein (which report expresses an
unqualified opinion on the combined financial statements and includes explanatory paragraphs referring to the ability of the Company to continue as a going concern, the allocation of corporate costs
from Tanfield, and the Company's acquisition of the assets and liabilities of SEV Group Ltd. and Saxon Specialist Electric Vehicles from Tanfield). Such combined financial statements have been
so included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.
The
combined financial statements of Smith Electric Vehicles Corp. as of December 31, 2009 and for each of the two years in the period ended December 31, 2009 included in
this prospectus have been audited by Deloitte LLP, an independent registered public accounting firm, as stated in their report appearing herein (which report expresses an unqualified opinion on
the combined financial statements and includes explanatory paragraphs referring to the ability of the Company to continue as a going concern, the allocation of corporate costs from Tanfield, and the
Company's acquisition of the assets and liabilities of SEV Group Ltd. and Saxon Specialist Electric Vehicles from Tanfield). Such combined financial statements have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 regarding the shares of common stock offered hereby.
This prospectus does not contain all of the information found in the registration statement. For further information regarding us and the shares of common stock offered by this prospectus, we refer
you to the full registration statement, including its exhibits and schedules, filed under the Securities Act. The registration statement, of which this prospectus forms a part, including its
exhibits and schedules, may be inspected and copied at the public reference room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Copies of the materials may also be
obtained from the SEC at prescribed rates by writing to the public reference room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the
operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website on the Internet at http://www.sec.gov. Our registration
statement, of which this prospectus constitutes a part, can be downloaded from the SEC's website.
163
Table of Contents
INDEX TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firms
F-2
Combined Balance Sheets as of December 31, 2010 and 2009
and Consolidated Balance Sheet as of June 30, 2011 (unaudited)
F-4
Combined Statements of Operations for the years ended
December 31, 2010, 2009 and 2008, Consolidated Statement of Operations for the six months ended June 30, 2011 (unaudited) and Combined Statement of Operations for the six months ended 2010 (unaudited)
F-5
Combined Statements of Comprehensive Loss for the years ended
December 31, 2010, 2009 and 2008, Consolidated Statement of Comprehensive Loss for the six months ended June 30, 2011 (unaudited) and Combined Statement of Comprehensive Loss for the six months ended June 30, 2010 (unaudited)
F-6
Combined Statements of Stockholders' Deficit for the years ended December 31, 2010,
2009 and 2008 and Consolidated Statement of Stockholders' Deficit for the six months ended June 30, 2011 (unaudited)
F-7
Combined Statements of Cash Flows for the years ended
December 31, 2010, 2009 and 2008, Consolidated Statement of Cash Flows for the six months ended June 30, 2011 (unaudited) and Combined Statement of Cash Flows for the six months ended June 30, 2010 (unaudited)
F-8
Notes to Combined and Consolidated Financial
Statements
F-10
F-1
Table of Contents
Smith Electric Vehicles Corp.
REPORT OF THE INDEPENDENT REGISTERED ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Smith Electric Vehicles Corp.
Kansas City, Missouri
We
have audited the accompanying combined balance sheet of Smith Electric Vehicles Corp. ("Smith US") as of December 31, 2010, and the related combined statements of operations,
comprehensive loss, stockholders' deficit, and cash flows for the year then ended. The combined financial statements include the accounts of Smith Electric Vehicles Corp., a partially owned subsidiary
of The Tanfield Group Plc ("Tanfield") and two related companies, SEV Group Ltd and Saxon Specialist Electric Vehicles, a wholly owned subsidiary and division, respectively, of Tanfield.
These companies, which are referred to collectively herein as the "Company", are under common ownership and control. As discussed in Note 1, the financial statements of SEV Group Ltd and
Saxon Specialist Electric Vehicles have been derived from Tanfield's consolidated financial statements to present the historical financial position, results of operations, and cash flows of Tanfield's
vehicle maintenance and electric vehicles businesses. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audit.
We
conducted our audit 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In
our opinion, such financial statements present fairly, in all material respects, the combined financial position of Smith Electric Vehicles Corp. at December 31, 2010, and the
combined results of its operations and its cash flows for the year ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
The
accompanying combined financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the combined financial
statements, the Company's recurring losses from operations, negative working capital, stockholders' capital deficiency, and uncertainty around the ability to raise additional capital raise substantial
doubt about its ability to
continue as a going concern. Management's plans concerning these matters are also discussed in Note 1. The combined financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
As
discussed in Note 15, the combined financial statements of the Company include allocations of certain corporate costs from Tanfield. These costs may not be reflective of the
actual level of costs which would have been incurred had the Company operated as a separate entity apart from Tanfield.
As
discussed in Notes 1 and 15 to the combined financial statements, on January 1, 2011, the Company acquired the assets and liabilities of SEV Group Ltd and Saxon
Specialist Electric Vehicles from Tanfield.
/s/
Deloitte & Touche LLP
Kansas
City, Missouri
November 9, 2011
F-2
Table of Contents
Smith Electric Vehicles Corp.
REPORT OF THE INDEPENDENT REGISTERED ACCOUNTING FIRM
To
the Board of Directors and Stockholders of
Smith Electric Vehicles Corp.
Kansas City, Missouri
We
have audited the accompanying combined balance sheet of Smith Electric Vehicles Corp. ("Smith US") as of December 31, 2009, and the related combined statements of operations,
comprehensive loss, stockholders' deficit, and cash flows for the years ended December 31, 2009 and 2008. The combined financial statements include the accounts of Smith Electric Vehicles
Corp., a partially owned subsidiary of The Tanfield Group Plc ("Tanfield") and two related companies, SEV Group Ltd and Saxon Specialist Electric Vehicles, a wholly owned subsidiary and
division, respectively, of Tanfield. These companies, which are referred to collectively herein as the "Company", are under common ownership and control. As discussed in Note 1, the financial
statements of SEV Group Ltd and Saxon Specialist Electric Vehicles have been derived from Tanfield's consolidated financial statements to present the historical
financial position, results of operations, and cash flows of Tanfield's vehicle maintenance and electric vehicles businesses. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these combined 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, such financial statements present fairly, in all material respects, the combined financial position of Smith Electric Vehicles Corp. at December 31, 2009, and the
combined results of its operations and its cash flows for the years ended December 31, 2009 and 2008, in conformity with accounting principles generally accepted in the United States of
America.
The
accompanying combined financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the combined financial
statements, the Company's recurring losses from operations, negative working capital, stockholders' capital deficiency, and uncertainty around the ability to raise additional capital raise substantial
doubt about its ability to continue as a going concern. Management's plans concerning these matters are also discussed in Note 1. The combined financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
As
discussed in Note 15, the combined financial statements of the Company include allocations of certain corporate costs from Tanfield. These costs may not be reflective of the
actual level of costs which would have been incurred had the Company operated as a separate entity apart from Tanfield.
As
discussed in Notes 1 and 15 to the combined financial statements, on January 1, 2011, the Company acquired the assets and liabilities of SEV Group Ltd and Saxon
Specialist Electric Vehicles from Tanfield.
/s/
Deloitte LLP
Newcastle-upon-Tyne,
United Kingdom
November 9, 2011
F-3
Table of Contents
Smith Electric Vehicles Corp.
COMBINED BALANCE SHEETS AS OF DECEMBER 31, 2010 AND 2009
AND CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2011 (UNAUDITED)
(in thousands, except share and per share amounts)
December 31,
June 30,
2010
2009
2011
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
1,000
$
1,183
$
7,227
Accounts receivable, net
2,808
2,504
4,869
Other receivables
1,198
8
1,290
Inventories
19,178
7,860
16,493
Other current assets
2,108
1,173
3,415
Total current assets
26,292
12,728
33,294
Property, plant and equipment, net
3,611
2,912
4,747
Other long-term assets
420
694
353
Total assets
$
30,323
$
16,334
$
38,394
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable
$
16,231
$
4,147
$
17,552
Payable to Tanfield
5,730
6,293
—
Bridge notes, net of discount
13,055
—
—
Deferred revenue
6,715
419
527
Bridge note detachable warrants
3,039
—
—
Warranty reserve
6,125
1,107
6,633
Note payable—Tanfield
—
—
6,250
Other current liabilities
4,701
1,310
5,250
Total current liabilities
55,596
13,276
36,212
Series A debentures, net of discount
9,859
8,930
10,031
Series A conversion option
2,612
1,340
3,052
Accrued interest
1,538
390
2,154
Note payable—Tanfield
—
—
1,500
Other long-term liabilities
3,149
5,019
2,449
Total liabilities
72,754
28,955
55,398
Commitments and contingencies (Note 13)
Convertible redeemable preferred stock: $0.001 par value and redeemable at $12.04 per share; Authorized shares—6,600,000; Issued and
outstanding shares—none as of December 31, 2010 and 2009, and 4,809,007 as of June 30, 2011
—
—
56,688
Stockholders' deficit
Common stock: $0.001 par value, Authorized shares—20,000,000 Issued and outstanding shares—10,381,152 and 9,694,022 as of December 31, 2010
and 2009, respectively, and 10,507,929 as of June 30, 2011
10
10
11
Additional paid-in capital
2,472
2,319
2,997
Common stock warrant
23
37
23
Accumulated other comprehensive loss
(2,311
)
(2,626
)
(2,540
)
Capital deficiency of Tanfield
(8,370
)
(3,539
)
—
Accumulated deficit
(34,255
)
(8,822
)
(74,183
)
Total stockholders' deficit
(42,431
)
(12,621
)
(73,692
)
Total liabilities, convertible redeemable preferred stock, and stockholders' deficit
$
30,323
$
16,334
$
38,394
See accompanying notes to combined and consolidated financial statements.
F-4
Table of Contents
Smith Electric Vehicles Corp.
COMBINED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED
DECEMBER 31, 2010, 2009 AND 2008,
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE
SIX MONTHS ENDED
JUNE 30, 2011 (UNAUDITED)
AND COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED
JUNE 30, 2010 (UNAUDITED)
(in thousands, except per share amounts)
Years ended December 31,
Six Months ended June 30,
2010
2009
2008
2011
2010
(unaudited)
Revenue
Vehicle
$
23,827
$
8,223
$
14,166
$
31,930
$
9,633
Service and repairs
11,767
14,631
18,208
5,672
6,191
Total revenue
35,594
22,854
32,374
37,602
15,824
Cost of revenue
Vehicle
33,117
13,370
21,671
40,035
12,335
Service and repairs
12,175
14,421
18,124
5,945
6,165
Total cost of revenue
45,292
27,791
39,795
45,980
18,500
Gross loss
(9,698
)
(4,937
)
(7,421
)
(8,378
)
(2,676
)
Research and development expense
2,550
1,126
9,478
1,457
830
Selling, general and administrative
13,307
10,697
5,411
7,031
4,360
Total operating expenses
15,857
11,823
14,889
8,488
5,190
Operating loss
(25,555
)
(16,760
)
(22,310
)
(16,866
)
(7,866
)
Other expense (income):
Interest expense
3,699
696
—
1,881
1,225
Government grant reimbursements
(688
)
(18
)
—
(205
)
(315
)
Loss on extinguishment of debt
—
—
—
971
—
Other expense, net
1,698
60
—
1,763
745
Net loss before taxes
(30,264
)
(17,498
)
(22,310
)
(21,276
)
(9,521
)
Provision (benefit) for income taxes
—
—
—
—
—
Net loss
$
(30,264
)
$
(17,498
)
$
(22,310
)
$
(21,276
)
$
(9,521
)
Net loss per common share (basic and diluted)
$
(2.95
)
$
(1.89
)
Not applicable
(Note 2)
$(2.05)
$(0.94)
Weighted-average common shares outstanding (basic and diluted)
10,258
9,271
Not applicable
(Note 2)
10,381
10,133
See
accompanying notes to combined and consolidated financial statements.
F-5
Table of Contents
Smith Electric Vehicles Corp.
COMBINED STATEMENTS OF COMPREHENSIVE LOSS FOR THE YEARS ENDED
DECEMBER 31, 2010, 2009 AND 2008,
CONSOLIDATED STATEMENT OF
COMPREHENSIVE LOSS FOR THE SIX MONTHS ENDED
JUNE 30, 2011 (UNAUDITED)
AND COMBINED STATEMENT OF COMPREHENSIVE LOSS FOR THE SIX MONTHS ENDED
JUNE 30, 2010 (UNAUDITED)
(in thousands)
Years ended December 31,
Six Months ended June 30,
2010
2009
2008
2011
2010
(unaudited)
Net loss
$
(30,264
)
$
(17,498
)
$
(22,310
)
$
(21,276
)
$
(9,521
)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments
315
(12
)
(2,614
)
(229
)
492
Comprehensive loss
$
(29,949
)
$
(17,510
)
$
(24,924
)
$
(21,505
)
$
(9,029
)
See
accompanying notes to combined and consolidated financial statements.
F-6
Table of Contents
Smith Electric Vehicles Corp.
COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008 AND
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT FOR THE SIX MONTHS ENDED JUNE 30, 2011 (UNAUDITED)
(in thousands, except share amounts)
Common Stock
Accumulated
Other
Comprehensive
Income (Loss)
Equity
Capital
Deficiency of
Tanfield
Additional
Paid-in
Capital
Common
Stock
Warrant
Accumulated
Deficit
Total
Stockholders'
Equity (Deficit)
Shares
Amount
Balance at December 31, 2007
—
$
—
$
—
$
—
$
—
$
27,447
$
—
$
27,447
Comprehensive loss
—
—
—
—
(2,614
)
(22,310
)
—
(24,924
)
Balance at December 31, 2008
—
—
—
—
(2,614
)
5,137
—
2,523
Comprehensive loss
—
—
—
—
(12
)
(8,676
)
(8,822
)
(17,510
)
Common shares issued at inception of Smith US (Note 1 and 15)
8,999
9
518
37
—
—
—
564
Common shares issued for cash
695
1
336
—
—
—
—
337
Forfeiture of shares (Note 15)
(1,999
)
(2
)
—
—
—
—
—
(2
)
Share-based compensation (Note 15)
1,999
2
1,465
—
—
—
—
1,467
Balance at December 31, 2009
9,694
10
2,319
37
(2,626
)
(3,539
)
(8,822
)
(12,621
)
Comprehensive loss
—
—
—
—
315
(4,831
)
(25,433
)
(29,949
)
Warrant exercise
640
—
20
(14
)
—
—
—
6
Common shares issued for cash
47
—
37
—
—
—
—
37
Share-based compensation
—
—
96
—
—
—
—
96
Balance at December 31, 2010
10,381
10
2,472
23
(2,311
)
(8,370
)
(34,255
)
(42,431
)
Acquisition of Smith UK (Note 1 and 15):
Net distribution to Tanfield
—
—
—
—
—
(10,282
)
—
(10,282
)
Capital deficiency assumed
—
—
—
—
—
18,652
(18,652
)
—
Comprehensive loss
—
—
—
—
(229
)
—
(21,276
)
(21,505
)
Share-based compensation
127
1
525
—
—
—
—
526
Balance at June 30, 2011 (Unaudited)
10,508
$
11
$
2,997
$
23
$
(2,540
)
—
$
(74,183
)
$
(73,692
)
See accompanying notes to combined and consolidated financial statements.
F-7
Table of Contents
Smith Electric Vehicles Corp.
COMBINED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 2010, 2009 AND 2008,
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30, 2011 (UNAUDITED)
AND COMBINED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED
JUNE 30, 2010 (UNAUDITED)
(in thousands)
Years ended December 31,
Six Months ended
June 30,
2010
2009
2008
2011
2010
(unaudited)
OPERATING ACTIVITIES
Net loss
$
(30,264
)
$
(17,498
)
$
(22,310
)
$
(21,276
)
$
(9,521
)
Adjustments for non-cash items included in net loss:
Depreciation and amortization
1,123
842
827
743
480
Amortization of deferred financing costs
440
39
—
183
110
Non-cash services provided at formation of Smith US
—
207
—
—
—
Change in fair value of derivative financial instruments
1,699
61
—
1,687
745
Accretion of debt discount
1,312
121
—
547
383
Inventory impairment charges
4,587
4,392
5,887
3,695
2,891
Warranty charges
2,139
4,597
1,409
2,703
614
Interest expense—payable in kind
1,939
390
—
932
727
Loss on extinguishment of debt
—
—
—
971
—
Share-based compensation
96
1,465
—
526
65
Other
305
151
179
40
—
Changes in assets and liabilities:
Trade accounts receivable
(710
)
512
2,639
(4,245
)
(2,606
)
Inventories
(16,102
)
(5,437
)
(11,304
)
(488
)
(4,942
)
Other current assets
(81
)
(938
)
(127
)
(769
)
22
Accounts payable
12,015
(14
)
(4,225
)
(139
)
3,989
Deferred revenue
6,120
(346
)
(315
)
(6,662
)
1,132
Other liabilities
3,108
(1,117
)
934
(921
)
91
Net cash used in operating activities
(12,274
)
(12,573
)
(26,406
)
(22,473
)
(5,820
)
INVESTING ACTIVITIES
Additions to property, plant and equipment
(1,662
)
(804
)
(524
)
(1,707
)
(812
)
Net cash used in investing activities
(1,662
)
(804
)
(524
)
(1,707
)
(812
)
FINANCING ACTIVITIES
Proceeds from issuance of Series A convertible debentures and conversion option (Note 9)
663
10,088
—
—
663
Proceeds from issuance of bridge notes and related warrants, net of acceleration feature (Note 9)
14,150
—
—
—
5,650
Proceeds from issuance of common stock
43
337
—
—
43
Proceeds from issuance of convertible redeemable preferred stock, net of commissions
—
—
—
37,787
—
Payments on note payable—Tanfield
—
—
—
(6,500
)
—
Advances from (payments to) Tanfield, net
(269
)
4,298
27,402
—
(303
)
Deferred financing costs
(874
)
(389
)
—
—
(336
)
Deferred offering costs
—
—
—
(756
)
—
Other
(34
)
(80
)
(163
)
(182
)
(30
)
Net cash provided by financing activities
13,679
14,254
27,239
30,349
5,687
Effect of exchange rate changes on cash
74
26
(43
)
58
109
Net (decrease) increase in cash and cash equivalents
(183
)
903
266
6,227
(836
)
Cash and cash equivalents, beginning of year
1,183
280
14
1,000
1,183
Cash and cash equivalents, end of year
$
1,000
$
1,183
$
280
$
7,227
$
347
See accompanying notes to combined and consolidated financial statements.
F-8
Table of Contents
Smith Electric Vehicles Corp.
SUPPLEMENTAL CASH FLOW INFORMATION
(in thousands)
Years ended
December 31,
Six Months ended
June 30,
2010
2009
2008
2011
2010
(unaudited)
Cash paid for income taxes
$
—
$
—
$
—
$
—
$
—
Cash paid for interest
—
—
—
—
—
Non-cash investing and financing activities:
Property, plant and equipment accrued in accounts payable
177
58
—
77
108
Property, plant and equipment financed—capital lease
—
11
—
64
—
Accrued deferred financing costs
—
132
—
—
76
Deferred offering costs accrued in accounts payable
—
—
—
1,291
—
Intangible assets acquired upon formation of Smith US (Note 1 and 15)
—
355
—
—
—
Conversion of bridge notes and warrants to convertible redeemable preferred stock
—
—
—
18,901
—
Acquisition of Smith UK (Note 1 and 15)
—
—
—
10,282
—
See
accompanying notes to combined and consolidated financial statements.
F-9
Table of Contents
Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED
DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE  SIX MONTHS ENDED JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(1) Nature of Business and Presentation
The accompanying combined and consolidated financial statements include the accounts of Smith Electric Vehicles Corp. ("Smith US") a partially owned subsidiary of The Tanfield
Group Plc, ("Tanfield") and two related companies, SEV Group Ltd. and Saxon Specialist Electric Vehicles, a wholly owned subsidiary and division, respectively (collectively,
"Smith UK") of Tanfield prior to January 1, 2011. From the inception of Smith US in January 2009 through December 31, 2010, these companies were under common ownership and
control.
Smith US,
located in Kansas City, Missouri, was incorporated in Delaware on January 13, 2009, and is engaged in the development, manufacture, sale and servicing of
all-electric, zero-emission commercial trucks in the United States and Canada. At inception, the Company issued 8,999,089 shares of its common stock to certain individuals and
an entity for services rendered in connection with our founding and to Tanfield in consideration of a license agreement (the "License Agreement"). The general terms of the License Agreement were
agreed to prior to the issuance of the shares in January 2009 and the License Agreement was executed in August 2009.
Smith UK
designs, manufactures, sells and services all-electric, zero-emission commercial trucks in the United Kingdom and other international markets.
Smith UK also provides maintenance services for diesel-fueled vehicle fleets and sells and leases forklifts for warehouse use. Upon formation of Smith US, the knowledge,
technology and brand of Smith Electric Vehicles was licensed to Smith US by Tanfield for exclusive use in North America, in perpetuity.
Effective
January 1, 2011, Smith US acquired certain of the assets and liabilities of Smith UK, including the Smith brand, Smith UK's
zero-emission vehicle know-how and technology, the License Agreement, and Smith UK's maintenance division from Tanfield. These assets and liabilities were acquired by a
newly formed entity, Smith Electric Vehicles Europe Limited ("Smith Europe"). Smith Europe is a wholly-owned subsidiary of Smith US.
The
acquisition of certain of the assets and liabilities of Smith UK by Smith US represented a combination of entities under the common control and is accounted for in a manner
similar to the pooling-of-interest method and the historical financial statements of Smith US and Smith UK have been combined, retrospectively, as if the
transaction had occurred on January 13, 2009, Smith US's date of incorporation. The financial statements of Smith UK have been generated to present the historical financial
position, results of operations and cash flows of Tanfield's vehicle maintenance and electric vehicles businesses. Because Smith UK was the entity first owned by the controlling shareholder,
Smith UK has been presented as the historical predecessor entity prior to the formation of Smith US. As of and for the periods prior to December 31, 2010, the financial statements
of Smith US and Smith UK are presented on a combined basis and significant intercompany transactions have been eliminated.
As
of and for periods subsequent to January 1, 2011, the financial statements of Smith US and Smith Europe are presented on a consolidated basis.
The
unaudited financial information for the six months ended June 30, 2011 and 2010 reflects all adjustments that are, in the opinion of management, necessary to present fairly
our results of
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE
SIX MONTHS ENDED JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(1) Nature of Business and Presentation (Continued)
operations,
financial position, and cash flows for the periods presented. The adjustments consist solely of normal recurring adjustments.
Terms
such as the "Company", "Smith", "us", "we", and "ours" refer to the combination of Smith US and Smith UK for periods as of and prior to December 31, 2010 and
refer to the consolidated entity Smith Electric Vehicles Corp., which includes Smith Europe, for periods as of and subsequent to January 1, 2011. The Company's fiscal year end is
December 31.
Going Concern and Management Plans
The combined and consolidated financial statements contemplate the realization of assets and the settlement of liabilities and
commitments in the normal course of business. On a combined basis, we incurred a net loss of $70.1 million for the three year period ended December 31, 2010, and, on a consolidated
basis, we incurred a net loss of $21.3 million for the six month period ended June 30, 2011. As of December 31, 2010 and June 30, 2011, we had a working capital deficit of
$29.3 million and $2.9 million, respectively.
Management
has developed an operating plan for the remainder of fiscal year 2011 and for fiscal year 2012 and believes that we will be able to obtain additional financial resources to
achieve our plan and to sustain operations through the end of fiscal year 2012. Nevertheless, management will be monitoring the plan closely throughout this period and should the plan objectives not
be met during the year, remedial actions will be initiated.
During
March 2011, we issued Series B convertible redeemable preferred stock in return for net cash proceeds of $37.8 million. At that time, our bridge note holders elected
to convert substantially all of their bridge note principal and accrued interest into Series B convertible redeemable preferred stock. See Note 9, "Convertible Debt and Convertible
Redeemable Preferred Stock", for additional information.
Beginning
in August 2011, we transitioned the U.S. produced Smith Newton vehicle to our Smith Power and Smith Drive technologies and we temporarily suspended vehicle production at
our Kansas City, Missouri facility in order to facilitate this transition. We began production of our second generation Newton, which includes our Smith Drive, Smith Power and Smith Link technologies,
in November 2011. We anticipate that our Smith Power, Smith Drive and Smith Link technologies will result in significantly reduced costs and will enable us, over time, to reduce our losses or to
become profitable.
During
September 2011, we issued a senior unsecured promissory note for cash proceeds of $2.8 million. During October 2011, we issued senior unsecured convertible promissory notes
for aggregate cash proceeds of $25.2 million and the discharge of the indebtedness under the senior unsecured promissory note issued in September 2011. However, we will need to obtain
additional capital in order to continue to fund operations.
Management
cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. These factors
raise substantial
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE
SIX MONTHS ENDED JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(1) Nature of Business and Presentation (Continued)
doubt
about our ability to continue as a going concern. These financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should we be unable to continue as a going concern.
(2) Summary of Significant Accounting Policies
Cash and Cash Equivalents
—Cash and cash equivalents are stated at cost, which, due to their short-term nature, approximates fair value.
All highly liquid investments with an original or remaining maturity of three months or less at the date of purchase are considered to be cash equivalents. Cash and cash equivalents are maintained
with financial institutions and the amount on deposit may exceed the amount of insurance provided on such deposits.
Accounts Receivable
—We generally grant uncollateralized credit to our customers. Accounts receivable are stated net of an allowance for
uncollectible
amounts, which is determined by establishing reserves for specific accounts and consideration of historical and estimated probable losses. Uncollectible accounts are written-off against
the allowance for doubtful accounts after collection efforts have been exhausted. We recognized bad debt expense of approximately $249,000, $70,000, and $255,000 during the years ended
December 31, 2010, 2009 and 2008, respectively. We did not recognize bad debt expense during the six months ended June 30, 2011 or 2010. The allowance for doubtful accounts was
approximately $224,000 and $105,000, respectively, at December 31, 2010 and 2009, and $70,000 at June 30, 2011.
Other Receivables
—Other receivables are comprised primarily of balances receivable from certain of our vendors for additional service action costs,
 as
described further in Note 13, "Commitment and Contingencies."
Use of Estimates
—The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of
America, using management's estimates and judgments where appropriate. These estimates and judgments affect the reported amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates and
judgments.
Concentrations of Risks
—We have risks related to market concentration, customer concentration, credit risk concentration, and source of supply
concentration.
We
have two operating segments, Zero Emission Vehicles and Maintenance Services. We have made a strategic decision to focus our resources on developing our Zero Emission Vehicles
business. As a result, external revenue for the Zero Emission Vehicles segment as a percentage of total revenue has increased from 22% for the year ended December 31, 2009 to 61% for the year
ended December 31, 2010 and to 82% for the six months ended June 30, 2011. As a result, we are vulnerable to any disruptions to the zero emission vehicle market, including any reduction
in government subsidies related to all-electric vehicles.
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE
SIX MONTHS ENDED JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(2) Summary of Significant Accounting Policies (Continued)
The
market for our vehicles and services primarily consists of commercial medium duty truck fleet managers in the United States and the United Kingdom. As a result, we have a limited
number of existing and potential customers. For the six months ended June 30, 2011 and the years ended December 31, 2010, 2009, and 2008, four significant customers represented 71%, 47%,
49%, and 41% of our revenue, respectively.
Our
credit risk concentration is related to our customer concentration risk as a limited number of customers generate a significant portion of our accounts receivable. As of
June 30, 2011, December 31, 2010, and December 31, 2009, our four largest customers accounted for 37%, 40%, and 20%, respectively, of our total accounts receivable.
There
are a limited number of qualified suppliers for the key components for our electric vehicles, and we generally source these key components from a single supplier. If a key supplier
is unable to provide us with high quality parts on a timely basis, our production process may be interrupted and we may be unable to deliver vehicles on schedule, which could have a material adverse
effect on our results of operations, financial position and cash flows.
Inventories
—Inventories are valued at the lower of cost or market. Cost is determined on a first-in, first-out (FIFO) basis
and includes material costs, inbound freight, labor and applicable overhead. We record inventory write-downs based on reviews for obsolescence determined primarily by historical usage and
future demand forecasts. We also adjust the carrying value of our inventories when we believe that the net realizable value is less than the carrying value. These write-downs are measured
as the difference between the cost of the inventory, including estimated costs to complete, and estimated net realizable selling prices. Once inventory is written down, a new, lower-cost
basis for that inventory is established.
Deferred Financing Costs
—Deferred financing costs consist of third party fees incurred to obtain debt financing. Deferred financing costs are
capitalized and amortized to interest expense using the effective-interest method over the estimated life of the related debt. Deferred financing costs are included as a component of other
current assets and other long-term assets on the accompanying combined and consolidated balance sheets.
Property, Plant and Equipment
—Capital additions and improvements are classified as property, plant and equipment and are recorded at cost.
Maintenance
and repair expenditures are expensed as incurred, while major improvements that extend the life or increase the functionality of the asset are capitalized as additions to property, plant and
equipment. Depreciation is calculated for financial statement purposes using the straight-line method over the estimated useful life or, for leasehold improvements, the term of the related
lease if shorter than the estimated useful life.
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE
SIX MONTHS ENDED JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(2) Summary of Significant Accounting Policies (Continued)
The
current range of estimated useful lives of the following types of assets is as follows:
Number of Years
Leased forklifts
5 - 10
Machinery and equipment
1 - 10
Furniture, fixtures and equipment
3 - 5
Property, buildings and leasehold improvements
1 - 10
Vehicles
3 - 5
Income Taxes
—Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are
recognized for the anticipated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis,
and for tax losses and credit carry-forwards. Deferred amounts are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Valuation allowances are established when, based upon available evidence, it is more likely than not that some or all of the deferred tax assets will not be
realized.
We
recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit.
For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than
50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Accrued interest and penalties related to unrecognized tax benefits are classified as income
tax expense.
Impairment of Long-Lived Assets
—We review long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated
undiscounted future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future net cash flows, an impairment charge is
recognized for the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower of their carrying value or fair value less cost to sell.
No impairment charges were recognized during the periods presented.
Revenue Recognition
—We recognize revenue when: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services
have been rendered and there are no uncertainties regarding customer acceptance; (iii) our price is fixed or determinable; and (iv) collection is reasonably assured. In instances where
customer acceptance is required, revenue is either recognized (a) upon shipment when we are able to demonstrate that the customer specific objective criteria have been met or (b) upon
the earlier of customer acceptance or expiration of the acceptance period. Payments received in advance of work performed are recorded as deferred revenue.
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE
SIX MONTHS ENDED JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(2) Summary of Significant Accounting Policies (Continued)
We
examine sales contracts to determine whether the contract contains multiple elements and, if so, to determine if separate units of accounting exist within the arrangement. As of
December 31, 2010, we have determined that all sales arrangements should be accounted for as a single unit of accounting.
Smith UK
and Smith Europe sell and lease forklifts. At inception of a lease contract, the customer will pay Smith UK or Smith Europe the full value of the forklift. The
full value of payments received for leased forklifts was approximately $151,000 and $107,000 in 2010 and 2008, respectively. We did not receive any such payments during 2009. At the end of a specified
period, generally five years, the customer is contractually obligated to return the forklift to us and we must pay the customer a residual value that was determined at the inception of the contract.
The up-front payment received by Smith UK or Smith Europe from the customer is initially recorded as deferred revenue and subsequently recognized as vehicle revenue on a
straight-line basis, net of expected guaranteed repurchase payments, over the life of the contract. Deferred revenue expected to be recognized as revenue more than one year subsequent to
the balance sheet date is classified as long-term deferred revenue and included within other long-term liabilities in the combined balance sheets. As of December 31,
2010 and 2009 and June 30, 2011, we had deferred revenue related to the leasing of forklifts of $836,000, $1.2 million and $557,000, respectively, of which $573,000, $798,000 and
$129,000, respectively, was classified as long-term. We recognize
the forklifts as a component of property, plant and equipment throughout the contract term and depreciate the forklifts on a straight-line basis, net of salvage value, over the life of the
contract. The residual value of the leased forklifts was $487,000 and $365,000 at December 31, 2010 and June 30, 2011, respectively. The recognized depreciation expense is included as a
component of cost of revenue in the combined statements of operations.
Foreign Currency Remeasurement and Transactions
—The functional currency for Smith UK and Smith Europe is the British Pound. Smith UK and
Smith Europe's assets and liabilities are translated at the period-end exchange rate and revenues and expenses are translated at the average exchange rates for the period. The resulting
gains or losses are recognized as a component of accumulated other comprehensive loss on the combined and consolidated balance sheets.
Foreign
currency transaction gains and losses result from the effect of exchange rate changes on transactions denominated in currencies other than the functional currency. We purchase
various inventory consumables and consulting services from foreign manufacturers that are settled in a currency other than the functional currency. Foreign currency gains and losses resulting from
foreign currency transactions are recognized in the period incurred and are included as a component of other expense, net in the combined statements of operations. Recognized net foreign currency
transaction (gains) losses are reflected in the combined and consolidated statements of operations and amounted to $12,000, $201,000 and $127,000 for the years ended December 31, 2010, 2009 and
2008, respectively, and $174,000 and $(1,000) during the six months ended June 30, 2011 and 2010, respectively.
Fair Value of Financial Instruments
—We have issued financial instruments that either contain embedded conversion or acceleration options or
include
detachable warrants. At the date we issue the financial instrument we measure and recognize as an asset or liability the fair value of these financial instruments. Changes in the fair value of these
financial instruments in subsequent periods are
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE
SIX MONTHS ENDED JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(2) Summary of Significant Accounting Policies (Continued)
recognized
as a component of our net loss and the carrying value of the asset or liability is adjusted accordingly. Fair value is defined as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Under applicable accounting guidance, a fair value hierarchy is
based on three levels of inputs, of which the first two are considered observable and the last is considered unobservable, that may be used to measure fair value:
Level 1—Quoted
prices in active markets for identical assets or liabilities.
Level 2—Inputs
other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that
are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable
inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
We
have financial instruments, consisting of a Series A conversion option liability, a bridge note acceleration option asset, and a bridge note detachable warrant, that are valued
based on Level 3 unobservable inputs that are supported by little or no market activity. As further described in Note 3, "Fair Value of Financial Instruments," our measurement of fair
value are based on binomial and discounted cash flow models, which require significant management assumptions and estimates. Key inputs, which are described for each instrument in Note 9,
"Convertible Debt and Convertible Redeemable Preferred Stock", for the various models used were probability and timing of the conversion, exercise, or acceleration event, enterprise value, volatility,
the risk-free interest rate, the risk-adjusted interest rate, and the anticipated dividend rate. The recognized loss for change in fair value for these instruments, in the
aggregate, was $1.7 million for both the six months ended June 30, 2011 and the year ended December 31, 2010 and is included as a component of other expense, net.
Government Grant Reimbursements
—In August 2009, the U.S. Department of Energy ("DOE") awarded Smith US a $10.0 million grant,
which was increased to $32.0 million in April 2010. The $32.0 million grant is comprised of (i) $4.0 million for new vehicle development, which is reimbursed at a rate of
approximately 33% of qualified research and development expenditures, and (ii) $28.0 million to incentivize fleet customers to participate in an Electronic Vehicle ("EV") demonstration
program that will provide the DOE with certain performance data. We act as an intermediary between the DOE and the fleet customer and do not recognize revenues or costs related to this portion of the
DOE grant. If we do not comply with certain requirements, the DOE could terminate the EV Demonstration Project and we and our customers would lose access to any remaining funding available under the
grant. As of both June 30, 2011 and December 31, 2010, under the new vehicle development grant approximately $3.5 million was available if we incur sufficient qualifying
expenditures. As of June 30, 2011 and December 31, 2010, under the EV demonstration program there were approximately
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE
SIX MONTHS ENDED JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(2) Summary of Significant Accounting Policies (Continued)
$15.1 million
and $21.8 million, respectively, of funds available to customers for participation in the demonstration program.
Reimbursements
of qualified research and development expenditures received pursuant to the new vehicle development grant are recognized as a component of government grant reimbursements
in the combined and consolidated statements of operations and reimbursements related to the qualified capital expenditures are recorded as a reduction to the capitalized basis of the related asset.
During 2010, reimbursements received under this grant included research and development costs of approximately $460,000 and plant and equipment investments of approximately $96,000. We did not receive
any reimbursements under this grant during the six months ended June 30, 2011.
Certain
customers elect to participate in the EV demonstration program for either a two or three year term, and are eligible to receive an incentive amount based on the term of their
participation. During 2010, the DOE distributed approximately $6.2 million of customer incentive payments.
During
2009, we qualified for participation in certain research programs under the United Kingdom's national innovation agency programs sponsored by the U.K. Department for Business,
Innovation and Skills. Under these programs, we are eligible to receive approximately $1.3 million in aggregate reimbursements. Through June 30, 2011, we have qualified for
reimbursements totaling approximately $0.4 million, which have been recognized as a component of government grant reimbursements in the combined and consolidated statements of operations.
Start-up Costs
—Costs associated with start-up activities are expensed as incurred. Start-up costs of approximately
$3.2 million associated with the formation of Smith US have been included in selling, general and administrative expenses within the combined statements of operations for the year ended
December 31, 2009.
Research and Development Costs
—Costs incurred in the research and development of our products are expensed as incurred and include salaries,
third-party contractors, materials and supplies.
Warranty
—We provide a warranty on all vehicles we sell that, depending on the component, extends for a period of one to seven years. Currently, we
do
not offer a fee based extended warranty plan. At the date of vehicle sale, we recognize expense and accrue the related liability for estimated future expenditures related to warranty service actions.
Warranty reserves include management's estimate of the future costs to repair or to replace any items under warranty, based on actual warranty experience as it becomes available and other known
factors that may impact our evaluation of historical data. In addition, at each period end, the number and magnitude of additional service actions expected to be approved and actual additional service
actions are taken into consideration in our assumptions to ensure that the warranty reserve balance is adequate to meet future expected obligations. When collection is reasonably assured, we also
estimate and recognize the
amount of warranty claim recoveries to be received from our suppliers. Due to the uncertainty and potential volatility of these estimated factors, future experience may result in changes in our
assumptions and could materially affect net income. See Note 13, "Commitments and Contingencies" for more information regarding costs and assumptions for warranties and additional service
actions.
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE
SIX MONTHS ENDED JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(2) Summary of Significant Accounting Policies (Continued)
Share-Based Compensation
—Share-based compensation expense is recognized in the combined statements of operations based on the
fair value of the awards. In connection with the formation of Smith US, two employees received approximately 1.8 million shares of Smith US common stock. As there were no
performance or service conditions related to these shares, the approximate $146,000 fair value of these shares was immediately recognized as compensation expense. Our Chairman of the Board at
December 31, 2009 was awarded approximately 2.0 million shares of Smith common stock upon his appointment as Chairman in December 2009. As there were no performance or service conditions
related to these shares, the approximate $1.5 million fair value of these shares was immediately recognized as compensation expense in 2009.
The
fair value of stock options is calculated using the Black-Scholes option valuation model. Expected volatility is based on the historical volatility of stocks of
comparable "clean energy" companies traded on an exchange. The expected terms of the options were calculated using the simplified method as we do not have sufficient historical exercise data. The risk
free interest rate is based on the U.S. Treasury rate at the time of the grant for instruments of a comparable life. Our valuation model assumes a zero dividend rate. Due to the limited number
of grants issued combined with the relatively short vesting periods of less than two years, we initially estimate that all awards will vest. Forfeitures of awards are recognized in subsequent periods
if actual forfeitures differ from those estimates. Compensation cost for each period is based on the percentage of the requisite service that has been rendered through the end of the period.
Shipping and Handling Costs
—Shipping and handling costs incurred have been included in cost of revenue. Shipping and handling costs charged to
customers have been included in revenue.
Accumulated Other Comprehensive Loss
—Other comprehensive loss refers to revenue, expense, gains, and losses that are recorded as an element of
stockholders' deficit rather than as a component of net loss. Our other comprehensive loss consists primarily of foreign currency translation
adjustments related to Smith UK and Smith Europe, which use the British Pound as the functional currency.
Net Loss Per Share of Common Share
—Our basic net loss per common share is calculated by dividing the combined or consolidated net loss by the
weighted-average number of shares of Smith US common stock outstanding for the period. The diluted net loss per common share is computed by dividing the combined or consolidated net
loss using the weighted-average number of shares of Smith US common stock outstanding for the period and, if dilutive, potential common shares outstanding during the period. As
Smith US was not incorporated until January 2009, during 2008 there were no shares of Smith US common stock outstanding; accordingly, we did not calculate basic and diluted net loss per
common share for the year ended December 31, 2008. Potential common shares consist of stock options to purchase common shares and warrants to purchase common shares and convertible securities.
When calculating incremental shares related to outstanding options and warrants, we apply the treasury stock method. The treasury stock method assumes that proceeds, consisting of the amount the
employee or other holder must pay on exercise, compensation cost attributed to future services and not yet recognized, and excess tax benefits that would be credited to additional paid-in
capital on exercise of the options or warrants, are used to repurchase outstanding
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE
SIX MONTHS ENDED JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(2) Summary of Significant Accounting Policies (Continued)
shares
at the average market price for the period. When calculating incremental convertible securities, we apply the if-converted method. The if-converted method assumes
conversion as of the beginning of the period and adds back to the numerator applicable interest charges and dividends. As we incurred losses during all periods presented, no potential common shares
were dilutive and, accordingly, our calculation included only weighted-average common shares outstanding for the period. As a result, 3.8 million and 15.7 million potential
common shares as of December 31, 2010 and 2009, respectively, and 7.1 million and 12.5 million potential common shares as of June 30, 2011 and 2010, respectively, were
excluded from the calculation of diluted net loss per common share as presented in our combined and consolidated statements of operations.
Deferred Offering Costs
—Costs directly associated with the preparation and filing of our registration statement related to our initial public
offering
of securities are capitalized and recorded as deferred offering costs. Upon completion of the proposed initial public offering, such costs will be recorded as a reduction of the proceeds received in
arriving at the amount to be recorded in stockholders' deficit. If the offering is not successful, the deferred offering costs will be expensed in the consolidated statement of operations. Deferred
offering costs capitalized as a component of other current assets on our consolidated balance sheet amounted to approximately $2.0 million as of June 30, 2011. We had not incurred
deferred offering costs as of or for the year ended December 31, 2010.
New Accounting Pronouncements
In May 2011, the Financial Accounting Standards Board updated the guidance regarding certain accounting and disclosure requirements
related to fair value measurements. The updated guidance amends U.S. Generally Accepted Accounting Principles ("GAAP") to create more commonality with International Financial Reporting
Standards by changing some of the wording used to describe requirements for measuring fair value and for disclosing information about fair value measurements. This update is effective for fiscal
years, and interim periods within those years, beginning after December 15, 2011. Early adoption is not permitted. We do not expect the adoption of this update to have a material impact on our
financial position, results of operations or cash flows.
(3) Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, accounts receivable, other receivables, and accounts payable approximate fair value. Estimation of the fair value of our convertible
debt was not practicable as we were unable to obtain trading information on similar instruments due to the nature of the Series A Debentures and Bridge Notes. As a basis for determining the
fair value of certain assets and liabilities, we follow a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows: (Level I) observable
inputs such as quoted prices in active markets; (Level II) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level III)
unobservable inputs in which there is little or no market data which requires us to develop our own assumptions. This hierarchy requires us to use observable market data, when available, and to
minimize the use of unobservable inputs when determining fair value. The only asset measured at fair value on a recurring basis is the Bridge Note Acceleration Option. Liabilities
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE
SIX MONTHS ENDED JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(3) Fair Value of Financial Instruments (Continued)
measured
at fair value on a recurring basis are the Series A Conversion Option and the Bridge Note Detachable Warrants. See Note 9, "Convertible Debt and Convertible Redeemable Preferred
Stock" for
additional information regarding the Bridge Note Acceleration Option, the Series A Conversion Option and the Bridge Note Detachable Warrants.
Following
is a summary of our financial assets and liabilities measured at fair value on a recurring basis (in thousands):
Fair Value at June 30, 2011 (Unaudited)
Fair Value
Level I
Level II
Level III
Liabilities
Series A conversion option
$
3,052
—
—
$
3,052
Fair Value at December 31, 2010
Fair Value
Level I
Level II
Level III
Assets
Bridge note acceleration option
$
471
—
—
$
471
Liabilities
Series A conversion option
$
2,612
—
—
$
2,612
Bridge note detachable warrant
$
3,039
—
—
$
3,039
Fair Value at December 31, 2009
Fair Value
Level I
Level II
Level III
Liabilities
Series A conversion option
$
1,340
—
—
$
1,340
F-20
Table of Contents
Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(3) Fair Value of Financial Instruments (Continued)
The table below presents the activity of our assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended
December 31, 2010 and 2009 and the six months ended June 30, 2011 (in thousands):
Series A
Conversion
Option
Bridge Note
Detachable
Warrant
Bridge Note
Acceleration
Option
Liability (asset) as of January 1, 2009
$
—
$
—
$
—
Fair value of liability at issue date
1,279
—
—
Unrealized loss
61
—
—
Liability as of December 31, 2009
1,340
—
—
Fair value of liability (asset) at issue date
81
2,778
(718
)
Unrealized loss
1,191
261
247
Liability (asset) as of December 31, 2010
2,612
3,039
(471
)
Unrealized loss (gain)
440
775
(118
)
Realized loss on conversion
—
—
589
Conversion of Bridge notes to Series B convertible redeemable preferred shares
—
(3,814
)
—
Liability as of June 30, 2011 (Unaudited) (Note 9)
$
3,052
$
—
$
—
Unrealized
gains and losses are recognized as a component of other expense, net, on the accompanying Combined and Consolidated Statements of Operations. The loss on conversion was
recognized as a component of loss on extinguishment of debt on the accompanying consolidated statement of operations for the six months ended June 30, 2011.
(4) Inventories
Inventories consist of the following (in thousands):
December 31,
June 30,
2010
2009
2011
(Unaudited)
Raw materials
$
8,961
$
5,857
$
13,276
Work-in-process
2,058
1,963
2,665
Finished goods inventory
8,159
40
552
$
19,178
$
7,860
$
16,493
During
the years ended December 31, 2010, 2009, and 2008 and the six months ended June 30, 2011 and 2010, we recognized inventory impairments, primarily to reduce the value
of our inventory to market, which was lower than cost, of $4.6 million, $4.4 million, $5.9 million, $3.7 million, and
F-21
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(4) Inventories (Continued)
$2.9 million,
respectively. The charges related to these inventory impairments were recognized as a component of cost of revenue on our combined and consolidated statements of operations.
(5) Other Current Assets
Other current assets consist of the following (in thousands):
December 31,
June 30,
2010
2009
2011
(Unaudited)
Prepaid expenses
$
1,259
$
1,173
$
1,369
Deferred offering costs
—
—
2,046
Bridge note acceleration option
471
—
—
Deferred financing costs
378
—
—
$
2,108
$
1,173
$
3,415
(6) Property, Plant and Equipment
A summary of property, plant and equipment is as follows (in thousands):
December 31,
June 30,
2010
2009
2011
(Unaudited)
Leased forklifts
$
1,587
$
1,875
$
1,638
Machinery and equipment
1,010
510
1,332
Furniture, fixtures and equipment
923
537
1,203
Property, buildings and leasehold improvements
847
763
906
Vehicles
1,192
679
2,355
5,559
4,364
7,434
Accumulated depreciation and amortization
(2,195
)
(1,645
)
(2,972
)
3,364
2,719
4,462
Construction in progress
247
193
285
$
3,611
$
2,912
$
4,747
F-22
Table of Contents
Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(6) Property, Plant and Equipment (Continued)
Depreciation
expense was recognized in our combined and consolidated statements operations as follows (in thousands):
Years ended December 31,
Six months ended June 30,
2010
2009
2008
2011
2010
(Unaudited)
Cost of revenue
$
494
$
311
$
343
$
348
$
206
Selling, general and administrative
451
368
484
380
185
$
945
$
679
$
827
$
728
$
391
(7) Other Current Liabilities
Other current liabilities consist of the following (in thousands):
December 31,
June 30,
2010
2009
2011
(Unaudited)
Accrued expenses
$
2,701
$
1,310
$
2,250
Litigation settlement accrual
2,000
—
3,000
$
4,701
$
1,310
$
5,250
The
litigation settlement accrual is further discussed in Note 13, "Commitments and Contingencies."
(8) Other Long-term Liabilities
Other long-term liabilities consist of the following (in thousands):
December 31,
June 30,
2010
2009
2011
(Unaudited)
Warranty reserve, long-term
$
568
$
4,209
$
1,260
Litigation settlement accrual
2,000
—
1,000
Deferred revenue
573
798
129
Other
8
12
60
$
3,149
$
5,019
$
2,449
Our
warranty reserve and the litigation settlement accrual are further discussed in Note 13, "Commitments and Contingencies."
F-23
Table of Contents
Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(9) Convertible Debt and Convertible Redeemable Preferred Stock
We have issued 10% Series A secured convertible debentures ("Series A Debentures") and 12% senior unsecured convertible promissory bridge notes ("Bridge Notes"). These
instruments are referred to collectively as our "Convertible Debt".
We
separately value and record the initial fair value of the separable derivatives within our Convertible Debt instruments, including a conversion feature, detachable stock warrants, and
an acceleration feature. We calculate the fair value of the derivatives as of the end of each reporting period and recognize the change in fair value as a component of other expense, net on the
statement of operations. Fair value was calculated using a binomial model and key inputs were probability and estimated timing of conversion, enterprise value, volatility, the risk-free
interest rate and the anticipated dividend rate.
Our
convertible debt had scheduled maturities, exclusive of discount, as of December 31, 2010 and June 30, 2011 as follows (in thousands):
December 31, 2010
June 30, 2011
(Unaudited)
Less than 1 year
$
14,150
$
—
1 - 2 years
—
—
2 - 3 years
—
2,889
3 - 4 years
10,425
8,236
4 - 5 years
700
—
Total
$
25,275
$
11,125
Series A Convertible Debentures
During 2009, we initiated a private placement offering for sale up to 150 units at a price of $100,000 per unit or an aggregate of
$15.0 million. Each unit consisted of one Series A Debenture in the principal amount of $100,000 and 6,666 shares of our common stock. Each Series A Debenture has a five year term
and bears interest, payable in shares of our common stock, at the rate of 10% per annum. The Series A Debentures are secured by all of our assets and have a preference upon liquidation over our
common stock. We may prepay principal and interest on the Series A Debentures at any time without penalty. The Series A Debentures may be converted, but are not required to be converted,
by the holder at 80% of the price at which shares of our common stock are valued in an initial public offering or at 80% of the price at which shares of our common stock are sold in a reorganization
transaction.
During
2009 and 2010, we sold 111 of the 150 authorized units and received total proceeds of approximately $11.1 million. The Series A Debentures contain a conversion right
(the "Series A Conversion Option") that represents a derivative instrument. The proceeds from the issuance of the units were allocated on a relative fair value basis between the shares of
common stock and the Series A Debentures. An additional discount was established based on the Series A Debentures, as a result of bifurcating the Series A Conversion Option, equal
to the fair value of the Series A Conversion Option.
F-24
Table of Contents
Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(9) Convertible Debt and Convertible Redeemable Preferred Stock (Continued)
The
shares of common stock included in the units and the Series A Conversion Option were valued, upon issuance, at approximately $374,000 and $1.4 million, respectively. This difference
between the proceeds of the debentures and the Series A Debenture principal was recorded as a discount on the debt. The recorded debt discount is accreted by recording non-cash
charges to interest expense over the expected life of the Series A Debentures using the effective interest rate method.
The
carrying value of the Series A Debentures was $9.9 million and $8.9 million as of December 31, 2010 and 2009, respectively, and was $10.0 million
as of June 30, 2011. The fair value of the Series A Conversion Option, calculated using a binomial valuation model, was $2.6 million and $1.3 million as of
December 31, 2010 and 2009, respectively, and $3.1 million as of June 30, 2011.
The
total debt discount is amortized using the effective interest method over the 60-month term of the Series A Debentures. We recognized amortization of debt discount
costs of approximately $347,000 and $121,000 as a component of interest expense during the years ended December 31, 2010 and 2009, respectively, and approximately $172,000 for both the six
months ended June 30, 2011 and 2010.
Accrued
interest amounted to approximately $1.5 million and $390,000 as of December 31, 2010 and 2009, respectively, and approximately $2.2 million as of
June 30, 2011.
A
commission of 5% of the amount of proceeds we received in the Series A private placement, subject to certain exceptions, was paid to Wynston Hill Capital LLC ("Wynston
Hill"), a related party. Wynston Hill earned commissions of approximately $34,000 and $521,000 during the years ended December 31, 2010 and 2009, respectively, related to the Series A
private placement. These commissions are reflected as deferred financing costs and are included as a component of other current assets and other long-term assets on the accompanying
combined and consolidated balance sheets.
Deferred
financing costs related to the Series A private placement consisted of the following (in thousands):
December 31,
June 30,
2010
2009
2011
(Unaudited)
Deferred financing costs
$
555
$
521
$
555
Less: accumulated amortization
(150
)
(39
)
(205
)
$
405
$
482
$
350
F-25
Table of Contents
Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(9) Convertible Debt and Convertible Redeemable Preferred Stock (Continued)
Interest
expense on the Series A Debentures is as follows (in thousands):
Year Ended December 31,
Six Months Ended June 30,
2010
2009
2011
2010
(Unaudited)
Interest expense
$
1,148
$
390
$
615
$
557
Accretion of debt discount
347
121
172
172
Amortization of deferred financing costs
111
39
55
36
$
1,606
$
550
$
842
$
765
Convertible Promissory Bridge Notes
During 2010, we initiated a private placement offering for $15.0 million of units. Each unit consisted of a Bridge Note with a
principal amount of $500,000 and a detachable warrant with a stated exercise price of $0.01 that allowed the holder to purchase 25% of the amount of securities into which the Bridge Note is
convertible. The stated term of each Bridge Note was the lesser of one year from the issue date or the date of an equity offering resulting in gross proceeds to the Company of at least
$20.0 million (a "Qualified Offering"). These Bridge Notes are unsecured and are senior in liquidation to the Series A Debentures. Interest on the Bridge Notes is payable at a rate of
12% per annum. Upon a successful Qualified Offering, the principal and interest are due and payable immediately or, at the discretion of the note holder, the debt and/or accrued interest may be
converted into shares of the equity security issued in the Qualified Offering at a conversion price equal to the price per share of the equity securities issued in the Qualified Offering. We sold
Bridge Notes with a principal amount of $14,150,000 during 2010. Accrued interest on our Bridge Notes as of December 31, 2010 was approximately $791,000.
The
warrant included with each Bridge Note is exercisable at the option of the holder from the date of the Qualified Offering through the second anniversary of the issue date of the
warrant. The Bridge Note does not need to be converted to stock in order to exercise the warrant.
We
concluded that the acceleration of maturity of the Bridge Note upon a Qualified Offering represented an embedded derivative and, accordingly, recognized the approximate $718,000
initial fair value of the benefit to us as an asset, included as a component of other current assets on the balance sheet. Fair value was calculated using a discounted cash flow model and the key
inputs were probability and timing of an acceleration event and interest rate. We refer to this derivative as the "Bridge Note Acceleration Option."
We
concluded that the detachable warrants represent a liability because they do not represent an option to acquire a fixed number of shares of stock for a fixed strike price. Based on
the assumptions for a Qualified Offering and concurrent exercise of the warrants, we recognized the approximate $2.8 million warrant initial fair value as a current liability. Fair value was
calculated using a binomial
F-26
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(9) Convertible Debt and Convertible Redeemable Preferred Stock (Continued)
model
and key inputs were probability and timing of a Qualified Offering, enterprise value, volatility, the risk-free interest rate and the anticipated dividend rate.
We
recognized an initial debt discount of approximately $2.1 million, which represents the net initial fair value of the detachable warrants net of the benefit of the Bridge Note
Acceleration Option, as a reduction to the Bridge Note liability. The discount is accreted to interest expense using the effective
interest method over the one-year Bridge Note contractual term. As of December 31, 2010, the debt discount, net of approximately $965,000 of accretion, was approximately
$1.1 million and will be recognized as interest expense during 2011. During the six months ended June 30, 2011, we recognized $375,000 of the amount as interest expense and the remaining
$720,000 was recognized as a component of loss on extinguishment of debt.
A
commission of 5% of the amount of proceeds we received in the Bridge Note financing, subject to certain exceptions, was paid to Wynston Hill, a related party. Wynston Hill earned
commissions of approximately $708,000 during 2010 related to this private placement. This commission was reflected as deferred financing cost and is included as a component of other current assets on
the combined balance sheets. Amortization of deferred financing costs reported as interest expense, using the effective-interest amortization method, was approximately $329,000 for the year ended
December 31, 2010. During the six months ended June 30, 2011, we recognized $128,000 of the amount as interest expense and the remaining $251,000 was recognized as a component of loss on
extinguishment of debt.
Interest
expense on the Bridge Notes is summarized as follows (in thousands):
Year Ended December 31,
Six Months Ended June 30,
2010
2009
2011
2010
(Unaudited)
Interest expense
$
791
$
—
$
316
$
170
Accretion of debt discount
965
—
375
211
Amortization of deferred financing costs
329
—
128
74
$
2,085
$
—
$
819
$
455
During
March 2011, substantially all of the Bridge Notes, accrued interest, and detachable warrants were converted to shares of Series B preferred stock and the remainder were
settled by cash payment of approximately $171,000. On conversion and cash payment, we recognized a loss on extinguishment of debt of approximately $971,000.
Convertible Redeemable Preferred Stock
During March 2011, in a private placement we sold approximately 3,239,000 shares of our Series B convertible preferred stock,
par value $0.001 per share ("Series B preferred stock"), for cash proceeds of $39.0 million and we issued an additional approximately 1,570,000 shares of Series B preferred stock
upon the conversion of our outstanding bridge notes and the holders' exercise of the related warrants.
F-27
Table of Contents
Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(9) Convertible Debt and Convertible Redeemable Preferred Stock (Continued)
We
paid Wynston Hill, a related party, commission of approximately $1.2 million related to this private placement. Shares of our Series B preferred stock, which are
non-interest bearing and non-participating, have the right to vote, on an as-converted basis, together with shares of our common stock on all matters which are
subject to a vote of our common stock, and also have separate voting rights with respect to certain amendments of our second amended and restated certificate of incorporation and certain liquidation
events. Our Series B preferred stock has a liquidation preference of $12.04 per share (subject to adjustment) over our common stock. Our Series B preferred stock is convertible, on a
one-to-one basis, into shares of our common stock at any time at the election of the holder of the Series B preferred stock or automatically in the event of a firm
commitment underwritten public offering of our common stock, and is subject to certain anti-dilution protections. On or after March 1, 2018, the holders of at least a majority of
the outstanding shares of Series B preferred stock can require us to redeem, over a three year period, all outstanding shares of Series B preferred stock at a redemption value of $12.04
per share. As redemption of Series B preferred stock is outside our control, the Series B preferred stock is not included as a component of stockholders' equity on the accompanying
consolidated balance sheet as of June 30, 2011 or on the accompanying consolidated statement of stockholders' deficit for the six months ended June 30, 2011.
(10) Share-Based Compensation
Equity Incentive Compensation Plan
In December 2009, the Smith US Board of Directors approved the Smith Electric Vehicles US Corp. 2009 Incentive Compensation Plan (the
"2009 Plan"), which provides for the grant of incentive stock options and nonqualified stock options or other awards to our employees, officers, directors, and outside consultants to purchase up to an
aggregate of 1,119,400 shares of our common stock. In addition, the Board, in its sole discretion, may make awards outside of the 2009 Plan. As an inducement to key employees, stock options and
unvested shares are issued outside of the 2009 Plan from time to time. Stock options are (i) granted at an option exercise price equal to the fair market value of Smith US's common stock on the
date of grant, (ii) are non-qualified options, (iii) are exercisable for up to 10 years from the date of grant, and (iv) vest 100% within two years of the grant
date. We anticipate that all shares we issue to settle our equity grants will be original issue shares. Accordingly, we do not anticipate we will repurchase shares on the open market during 2011 or
2012 for the purpose of settling our equity grants.
Stock Options
We utilize the Black-Scholes option valuation model to calculate the fair value of each stock option. Expected volatility is based on
the historical volatility of stocks of comparable "clean energy" companies traded on an exchange. The expected terms of the options were calculated using the simplified method given our limited
historical exercise data. The risk free interest rate is based on the U.S. Treasury rate at the time of the grant for instruments of a comparable life. Our valuation model assumes a zero dividend
rate. Due to the limited number of grants issued combined with the relatively short vesting periods of less than two years, we initially estimate that all awards will vest. Forfeitures of
F-28
Table of Contents
Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(10) Share-Based Compensation (Continued)
awards
are recognized in the period the forfeiture occurs. Compensation cost for each period is based on the percentage of the requisite service that has been rendered through the end of the period.
The
assumptions used to record share-based compensation expense for stock options are as follows:
Year ended
December 31, 2009
Six Months ended
June 30, 2011
(Unaudited)
Expected volatility
74.0%
76.5%
Weighted-average volatility
74.0%
76.5%
Expected dividends
0.0%
0.0%
Expected term (in years)
5.6 - 5.9
5.8 - 6.0
Risk-free rate
2.5 - 2.6%
2.3%
A
summary of our stock option activity, and related information, for the year ended December 31, 2009 is as follows:
Number of
Shares
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Weighted
Average
Remaining
Contractual
Term
(in years)
Outstanding at December 31, 2008
—
$
—
Issued
513,376
$
0.73
Forfeited
—
$
—
Outstanding at December 31, 2009
513,376
$
0.73
Vested or expected to vest at December 31, 2009
513,376
$
0.73
$
10,000
9.9
Exercisable at December 31, 2009
—
$
—
$
—
—
F-29
Table of Contents
Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(10) Share-Based Compensation (Continued)
A summary of our stock option activity, and related information, for the year ended December 31, 2010 is as follows:
Number of
Shares
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Weighted
Average
Remaining
Contractual
Term
(in years)
Outstanding at December 31, 2009
513,376
$
0.73
Issued
—
$
—
Forfeited
(256,688
)
$
0.73
Outstanding at December 31, 2010
256,688
$
0.73
Vested or expected to vest at December 31, 2010
256,688
$
0.73
$
2,618,000
8.9
Exercisable at December 31, 2010
—
$
—
$
—
—
A
summary of our stock option activity, and related information, for the six months ended June 30, 2011 (unaudited) is as follows:
Number of Shares
Weighted Average Exercise Price
Aggregate Intrinsic Value
Weighted Average Remaining Contractual Term (in years)
Outstanding at December 31, 2010
256,668
$
0.73
Issued
458,000
$
12.04
Forfeited
—
$
—
Outstanding at June 30, 2011
714,688
$
7.98
Vested or expected to vest at June 30, 2011
714,688
$
7.98
$
2,903,000
9.3
Exercisable at June 30, 2011
256,688
$
0.73
$
2,903,000
8.4
The
aggregate intrinsic values reflected in the tables above includes only those option awards for which the exercise price is less than the estimated fair value as of
December 31, 2009, December 31, 2010 or June 30, 2011, as applicable.
The
stock options vest over varying terms (14 months to 24 months) and expire 10 years from the grant date.
During
the year ended December 31, 2009 and during the six months ended June 30, 2011, we issued stock options with a fair value of approximately $243,000 and
$3.7 million, respectively. We did not issue any stock options during the years ended December 31, 2010 or 2008. Through June 30, 2011, no stock options had been exercised. We
recognized compensation expense, which is a non-cash charge, related to stock options of approximately $365,000, $96,000 and $6,000 during the periods ended June 30, 2011 and
December 31, 2010 and 2009, respectively. The recognized compensation expense is
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Table of Contents
Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(10) Share-Based Compensation (Continued)
included
as a component of selling, general and administrative expense. There was no income tax effect related to the stock option compensation expense during any of the above periods as deferred
income tax benefits otherwise provided were offset by valuation allowances as discussed in Note 12, "Income Taxes."
As
of December 31, 2010, we had approximately $20,000 of future unrecognized compensation costs related to stock options that is expected to be recognized over a weighted average
period of less than one year. As of June 30, 2011, we had approximately $3.3 million of future unrecognized compensation costs related to stock options that is expected to be recognized
over a weighted average period of approximately 1.6 years.
The
exercise prices of the stock options issued through June 30, 2011 were determined based on the estimated fair value of our common stock at the date of issue. Because there is
no public market for our common stock, management considers a number of objective and subjective factors when determining the fair value of our common stock. Objective and subjective factors
considered include recent sales of our convertible securities to unrelated third parties, valuations using the invested capital and private financing approaches, our operating and financial
performance during intervening periods, and the lack of liquidity in our common stock. Based on these factors, management estimated the fair
market value of our common stock to be $0.73 per share for shares issued during 2009 and $12.04 per share for shares issued during 2011.
Restricted Stock Awards
During April 2011, we issued 126,777 shares of restricted common stock with a weighted average grant date value of $12.04 per share and
an estimated aggregate intrinsic value of $1.5 million as of June 30, 2011. These shares issued vest 100% at the end of 19 months from issue date. During the six months ended
June 30, 2011, we recognized compensation expense, included as a component of selling, general and administrative expense, related to these restricted shares of $161,000. There was no income
tax effect related to the restricted stock compensation expense as deferred income tax benefits otherwise provided were offset by valuation allowances as discussed in Note 12, "Income Taxes."
As of June 30, 2011, we had approximately $1.4 million of future unrecognized compensation costs related to shares of restricted stock that is expected to be recognized over a weighted
average period of approximately 1.5 years.
(11) Warrants
Concurrent with the formation of Smith US in January 2009, Smith US issued a warrant to Tanfield that Tanfield could exercise to preserve its 49% ownership interest in Smith US, which
was amended in December 2009. As amended, the warrant was exercisable for five years for the purchase of the number of shares of our common stock, at a strike price of $0.01 per share, equal to 49% of
(i) the number of shares of common stock issued and vested pursuant to the 2009 Plan (see Note 10, "Share-Based Compensation"), (ii) the number of shares of common stock issued to
the investors in the Series A private placement described under Note 9, "Convertible Debt and Convertible Redeemable Preferred Stock" for amounts invested over $7.5 million and up
to $10.0 million, (iii) the
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(11) Warrants (Continued)
number
of shares of common stock issued to the investors in such Series A private placement for amounts invested over $10.0 million and up to $15.0 million, provided that such
amounts were invested on or prior to August 7, 2009, and (iv) the number of shares of our common stock issued to Roy Stanley under our services agreement with him (see Note 15,
"Related Party Transactions") (collectively, the "Available Warrant Shares"). At date of issue, the fair value of the warrant, calculated using the Black-Scholes valuation model, was approximately
$37,000 and included within stockholders' deficit. Since the warrant did not meet the net-settlement criteria, the warrant was not subject to revaluation. During March 2010, Tanfield
exercised its warrant, in part, and received 640,468 shares of our common stock.
See
Note 9, "Convertible Debt and Convertible Redeemable Preferred Stock" for a discussion of the detachable warrants issued in conjunction with our Bridge Notes.
(12) Income Taxes
We have operations in both the United States and the United Kingdom. Under the terms of the January 1, 2011 acquisition of Smith UK by Smith US, Tanfield is responsible for all
Smith UK tax liabilities and receives the benefit of all tax benefits, including net operating losses, through December 31, 2010. As these financial statements have been prepared to present the
historical financial position, results of operations and cash flows of Smith UK throughout the periods presented, we have included the tax effects, including the net operating loss asset and deferred
tax assets and liabilities, of Smith UK transactions for the three years ended December 31, 2010 and as of December 31, 2010 and 2009. The tax effects for the six months ended
June 30, 2011 and 2010 include only the effects of transactions occurring during that six month period.
Net
loss before income tax benefit for domestic and foreign operations is as follows (in thousands):
Year ended December 31,
Six months ended June 30,
2010
2009
2008
2011
2010
(Unaudited)
United States
$
(25,433
)
$
(8,822
)
$
—
$
(17,715
)
$
(7,496
)
United Kingdom
(4,831
)
(8,676
)
(22,310
)
(3,561
)
(2,025
)
$
(30,264
)
$
(17,498
)
$
(22,310
)
$
(21,276
)
$
(9,521
)
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(12) Income Taxes (Continued)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax
purposes. Significant components of our deferred tax assets and liabilities are as follows (in thousands):
December 31,
June 30,
2010
2009
2011
(Unaudited)
Deferred tax assets:
Net operating loss carryforwards:
United States
$
5,896
$
1,484
$
10,149
United Kingdom
5,598
3,076
1,038
Research and development
3,112
3,544
—
Inventory and warranty reserves
2,783
2,372
1,897
Start-up costs
1,137
1,237
1,096
Accrued expenses
1,023
1,052
132
Deferred revenue
180
784
—
Property, plant and equipment
—
—
59
Accounts receivable
—
—
26
Other
290
104
371
20,019
13,653
14,768
Valuation allowance
(19,622
)
(12,875
)
(14,726
)
Total deferred tax assets
397
778
42
Deferred tax liabilities:
Property, plant and equipment
(193
)
(275
)
—
Prepaid expenses
(138
)
(134
)
(42
)
Accounts receivable
(66
)
(369
)
—
Total deferred tax liabilities
(397
)
(778
)
(42
)
Net deferred tax liabilities
$
—
$
—
$
—
Upon
acquisition of Smith Europe on January 1, 2011, all of Smith UK's deferred tax assets and liabilities in existence as of December 31, 2010 were retained by Tanfield,
Smith UK's prior owner.
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(12) Income Taxes (Continued)
The
reconciliation of income tax computed at the U.S. statutory tax rate to income tax expense is as follows (in thousands):
Year ended December 31,
2010
2009
2008
Federal income tax benefit at U.S. statutory rate
$
(10,290
)
$
(5,949
)
$
(7,585
)
State income tax benefit, net of federal tax effect
(539
)
(316
)
—
Foreign tax rate differential
288
519
1,336
Nondeductible legal costs
1,395
17
—
Interest paid in kind
659
133
—
Fair market value derivative
577
21
—
Debt discount amortization
446
41
—
Other, net
242
119
11
Total income tax benefit
(7,222
)
(5,415
)
(6,238
)
Valuation allowance
7,222
5,415
6,238
Net income tax benefit
$
—
$
—
$
—
Management
believes that based on the available information, it is more likely than not that the deferred tax assets will not be realized, such that a full valuation allowance is
required against all net deferred tax assets.
As
of December 31, 2010 and June 30, 2011, we had approximately $15.8 million and $27.1 million, respectively, of federal and state operating loss
carryforwards available to offset future taxable income. These federal and state operating loss carryforwards will, if unused, expire in varying amounts beginning in 2029. As of June 30, 2011,
we had approximately $3.6 million of U.K. net operating losses, which do not expire, available to offset future taxable income. At December 31, 2010 and at June 30, 2011, a
partial valuation allowance existed against our net operating loss carryforwards as we did not believe it is more likely than not that the carryforwards will be utilized prior to expiration. In making
this determination, we did not consider future taxable income as we have incurred losses in each period since our U.S. inception. We only considered taxable income to the extent of reversals of net
temporary differences in existence as of December 31, 2010 and June 30, 2011.
Federal
and state laws impose substantial restrictions on the utilization of net operating loss and tax credit carry-forwards in the event of an "ownership change," as defined in
Section 382 of the Internal Revenue Code.
Uncertain Tax Positions
We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely
than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements
F-34
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(12) Income Taxes (Continued)
is
the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Accrued interest and penalties related to
unrecognized tax benefits are classified as income tax expense. We considered the tax positions for which the statute of limitations remained open and concluded that we have no uncertain tax
positions, and therefore no accrued interest or penalties, as of December 31, 2010, 2009, or 2008 and June 30, 2011. We do not anticipate that our conclusions regarding unrecognized tax
benefits will significantly increase or decrease within the next 12 months.
We
file income tax returns in the United States, the State of Missouri, and the United Kingdom. Tax years 2010 and 2009 (the year of our inception in the U.S.) remain subject to
examination for federal and Missouri purposes. All net operating losses and tax credits generated to date are subject to adjustment for U.S. federal and Missouri purposes. Effective January 1,
2011, upon the acquisition of Smith UK by Smith US, we are not responsible for tax examinations or the resulting liabilities of Smith UK for tax years 2010 and prior.
(13) Commitments and Contingencies
Operating Leases
—We have operating lease agreements for office and production space at various locations. These lease agreements expire at various
dates through 2015 and certain of them contain provisions for extension on substantially the same terms as are in effect. Where leases contain escalation clauses, we apply them in the determination of
straight-line rent expense over the lease term. Future minimum payments under operating leases at December 31, 2010 are as follow (in thousands):
Period ending December 31:
2011
$
574
2012
152
2013
42
2014
42
2015
32
$
842
Rent
expense incurred under all operating leases was approximately $1.1 million, $852,000 and $677,000 for the periods ended December 31, 2010, 2009 and 2008, respectively,
and $600,000 and $500,000 for the six month periods ended June 30, 2011 and 2010, respectively.
Included
in rent expense are balances charged under an obligation with Tanfield for the use of office and production space. Rent expense under this arrangement amounted to approximately
$321,000, $337,000 and $452,000, for the years ended December 31, 2010, 2009 and 2008, respectively, and $219,000 and $160,000 for the six month periods ended June 30, 2011 and 2010,
respectively. Prior to January 1, 2011, rent expense was charged through intercompany allocation and no commitment existed as of December 31, 2010.
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(13) Commitments and Contingencies (Continued)
Effective
January 1, 2011, upon separation from Tanfield, we entered into an arrangement with Tanfield for the use of this office and production space. The agreement requires
monthly rental payments of £23,500, or approximately $36,500, plus certain property related costs, through December
2013 and is cancellable by either party providing a six month notice. Additional lease commitments under this extension amount to approximately $1.3 million.
During
2011, we renewed for an additional year the leases for our corporate office and production facility in Kansas City, Missouri on substantially the same terms and conditions as the
original leases.
Product Warranty
—Included in the warranty cost accruals are costs for basic warranty coverage on vehicles sold and additional service actions,
such as
product repairs and other customer service actions. During 2007, Smith UK introduced the Newton and Edison models, which are on-road vehicles that used lithium-ion batteries.
Smith US sold its first vehicle during the fourth quarter of 2009. As a result, our estimates for warranty costs are based on limited historical warranty claim experience.
Included
in our December 31, 2010 warranty accrual is approximately $1.4 million in additional service action costs related to defective batteries. We have received
commitments from our vendors to reimburse us for a substantial portion of the additional service action costs and recorded $1.2 million within other receivables as of December 31, 2010
and $0.7 million as of June 30, 2011.
Product
warranty accruals were as follows (in thousands):
December 31,
June 30,
2010
2009
2011
(Unaudited)
Beginning reserve
$
5,316
$
999
$
6,693
Warranty expense
2,139
4,597
2,512
Change in vendor service action receivable
1,165
8
(218
)
Warranty costs incurred
(1,697
)
(562
)
(1,237
)
Foreign currency translation and other
(230
)
274
143
Ending reserve
$
6,693
$
5,316
$
7,893
Warranty
reserves were recognized as current and long-term as follows (in thousands):
December 31,
June 30,
2010
2009
2011
(Unaudited)
Current
$
6,125
$
1,107
$
6,633
Long-term
568
4,209
1,260
Ending reserve
$
6,693
$
5,316
$
7,893
Legal Matters
—From time to time and in the ordinary course of business, we are named as a defendant in legal proceedings related to various issues,
including worker's compensation claims, tort
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(13) Commitments and Contingencies (Continued)
claims
and contractual disputes. While the resolution of such matters may have an impact on our financial results for the period in which they are resolved, we believe that the disposition of these
matters will not, individually or in the aggregate, have a material effect upon our business, liquidity, or consolidated financial statements. Legal and other expenses related to such legal
proceedings are expensed as incurred.
In
March 2011, Jefferies & Company, Inc. ("Jefferies") filed suit against Smith in the New York Supreme Court, County of New York for alleged breach of an engagement letter
for Jefferies' provision of financial advisory services. The events underlying the suit occurred during 2010 and, accordingly, management determined that the suit should be evaluated as a contingent
liability as of December 31, 2010. Based on management's best estimate of a settlement amount, we have an accrued liability of $4.0 million as of both June 30,
,
2011
and December 31, 2010. During August 2011, we and Jefferies agreed to settle the lawsuit. Under the settlement, we paid Jefferies $2.0 million during September 2011, and executed
separate promissory notes, bearing interest at 9% per annum, to pay $1.0 million plus accrued interest by February 26, 2012 and an additional $1.0 million plus accrued interest by
July 31, 2012. As a part of the terms of settlement, the parties agreed to a mutual release of claims relating to the subject matter of the lawsuit. The promissory notes may be prepaid without
penalty at any time and, if we receive proceeds through an initial public offering, any unpaid promissory note principal and interest becomes immediately due and payable.
(14) Retirement Plan
Smith UK provides employees with a group personal pension plan administered by a third party. There were separate plans depending on whether the employee was employed by the operating
division of Tanfield or by the wholly-owned subsidiary of Tanfield. Each employee has an individual plan policy document in their own name. These plans are defined contribution plans under which Smith
UK made contributions, which vested immediately, and under which the employee could contribute on a voluntary basis. Once the required contributions are made, Smith UK has no further obligation under
the plans. We recognized contribution expense related to these plans of approximately $122,000, $132,000, and $175,000 for the years ended December 31, 2010, 2009 and 2008, respectively, and
approximately $110,000 and $60,000 for the six months ended June 30, 2011 and 2010, respectively.
(15) Related Party Transactions
Founders Shares
In January 2009 we issued 8,999,089 shares of our common stock to our founders ("Founders Shares") with a fair market value at date of
issue of $0.08 per share. The fair market value of $0.08 per share was determined using a cost approach method based upon the cost the shareholders incurred on or before the inception date.
We
issued 4,409,549 Founders Shares to Tanfield, valued at approximately $318,000, in consideration of the right to enter into a license agreement, which was recorded as a contributed
F-37
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED
JUNE 30, 2011 AND 2010 IS UNAUDITED.)
(15) Related Party Transactions (Continued)
intangible
asset. The general terms of this agreement were agreed to with the issuance of the shares in January 2009 followed by the execution of the agreement in August 2009.
We
issued 797,063 Founders Shares to Wynston Hill for consulting services rendered in connection with our formation, development of a company business plan, and financial advice. Upon
our formation in January 2009, we recognized professional services expense of approximately $64,000 for these services as a component of selling, general and administrative expense in our statement of
operations.
We
issued 1,793,677 Founders Shares to our two initial executive officers for services rendered in connection with our founding. Upon formation in January 2009, we recognized
compensation expense
of approximately $143,000 for these services as a component of selling, general and administrative expense in our statement of operations.
We
issued 1,998,800 Founders Shares to an executive officer with restrictions of forfeiture if the officer was not named Chairman of the Board by December 31, 2009. We concluded
that the performance condition was not probable of being attained by December 31, 2009 and therefore, no compensation expense was recognized upon formation. In December 2009, the Board of
Directors appointed Roy Stanley, former CEO and Chairman of Tanfield, as Chairman of the Board, and the 1,998,800 shares were awarded to him with no performance or service conditions. We recognized
compensation expense of approximately $1.5 million related to these shares in December 2009 based on our estimate of the fair market value of stock issued.
Warrant
Upon our formation, as described in Note 11, "Warrants", we issued Tanfield an anti-dilution warrant for shares of
common stock upon the occurrence of certain events.
Commissions
As described in Note 9, "Convertible Debt and Convertible Redeemable Preferred Stock", during 2010 and 2009 we paid Wynston Hill
a 5% commission in connection with our Series A and Bridge Note financings. During the six months ended June 30, 2011, we paid Wynston Hill a commission of $1.2 million for
serving as placement agent in connection with the private placement of our Series B preferred stock.
Goods and services
As described in Note 13, "Commitments and Contingencies", Smith UK was charged rent expense under an obligation with Tanfield
for the use of office and production space. In addition, Smith UK was contractually obligated to Tanfield for management fees and certain shared expenses, which amounted to approximately
$1.9 million, $2.1 million, and $1.3 million during 2010 and 2009 and 2008, respectively and approximately $1.0 million during the six months ended June 30, 2010.
Smith UK was not obligated to Tanfield for these management fees after December 31, 2010 and, accordingly no expense was recognized under this obligation during the six months ended
June 30, 2011.
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND
2010 IS UNAUDITED.)
(15) Related Party Transactions (Continued)
The net balance that we owe Tanfield on a combined basis appears as a payable to Tanfield on the combined balance sheet, and as of December 31, 2010 and 2009 amounted to
$5.7 million and $6.3 million, respectively. On January 1, 2011, as part of our purchase of certain assets of Smith UK from Tanfield, the balance payable under this arrangement
was included as part of the purchase price.
Effective
January 1, 2011, we entered into a six-month Transition Services Agreement with Tanfield for certain administrative services related to our acquisition of
Smith UK. Total transition fees paid or payable under this agreement amounted to approximately $112,000 during the six months ended June 30, 2011.
During
December 2009, we entered into a services agreement with our Chairman under which we issued to him 1,998,800 shares of Smith US common stock and pay him GBP 4,000 per month in
return for his services as a director and to advance our business, primarily through identifying new technology and product portfolio extension opportunities. During 2010, we paid our Chairman
approximately $71,000 pursuant to this services agreement.
During
December 2009, we entered into a services agreement with Tooling Edge, LLC, a company owned by the brother of our President and Chief Executive Officer. Tooling Edge
provides consulting related to the business of developing, manufacturing, assembling, selling and servicing electric vehicles. During 2010, we paid Tooling Edge approximately $85,000 for services
provided and reimbursement of expenses incurred.
Smith UK Acquisition
Effective January 1, 2011, Smith US acquired certain of the assets and liabilities of Smith UK, including the Smith brand, Smith
UK's zero-emission vehicle know-how and technology, the License Agreement, and Smith UK's maintenance division from Tanfield. On analysis of the transaction, we concluded that
the acquisition of certain of the assets and liabilities of Smith UK by Smith US represented a combination of entities under the common control and, accordingly, we accounted for this transaction in a
manner similar to the pooling-of-interest method. See Note 1, "Nature of Business and Presentation" for additional information about this acquisition and the accounting
for the acquisition.
Management
believes that this acquisition will provide us with a platform on which we can expand our business internationally and will also enhance our product development capabilities
as a result of access to Smith UK's engineering division.
The
total purchase price for Smith UK was $15.0 million, of which $750,000 was due at closing with the remainder payable in 19 equal monthly installments. The amount due at
closing was primarily settled through an offset to amounts due from Tanfield. The unpaid portion of the purchase price bears interest at a rate of 4.0% in excess of the base rate established by
Barclays Bank PLC from time to time. As of June 30, 2011, we owed Tanfield $8.1 million, which includes the $8.0 million balance of the purchase price and accrued interest,
and $0.1 million owed to Tanfield under a transitional services agreement we entered into in connection with the acquisition.
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND
2010 IS UNAUDITED.)
(15) Related Party Transactions (Continued)
As
the acquisition was a transaction of entities under common control, all assets and liabilities acquired continue to be recorded at their historical carrying value, we did not
recognize any identifiable intangible assets, and the excess purchase price of $10.3 million was recorded as a distribution to Tanfield. The excess purchase price is deductible in the U.K. over
a 25 year period. The assets and liabilities acquired have previously been recorded as assets and liabilities on our combined balance sheet as of December 31, 2010. The certain assets
and liabilities not acquired, consisting primarily of approximately $2.2 million of trade receivables and $7.0 million of payable to Tanfield, were included on our combined balance sheet
as of December 31, 2010 and were then derecognized as of the January 1, 2011 acquisition date.
Tanfield production facility agreement
Through Smith Europe, we occupy our 80,000 square foot production facility in Washington, Tyne and Wear, England from Tanfield pursuant
to a license to occupy dated January 1, 2011. Tanfield leases the entire 250,000 square foot facility from a third party. Smith Europe pays a fee of £23,500, or approximately
$36,500, plus certain property related costs per month to occupy space at the facility and we guarantee Smith Europe's obligations under the agreement. The facility agreement expires on
December 31, 2013 unless terminated earlier in accordance with its terms. Total rent and property costs paid or payable under this agreement amounted to approximately $408,000 during the six
months ended June 30, 2011 (unaudited).
(16) Information about Segments and Geographic Areas
Segment information
Operating segments are components of an enterprise about which discrete financial information is available that is evaluated regularly
by the chief operating decision maker in determining how to allocate resources and assess performance. This evaluation is based on our current structure including the acquisition of Smith UK and all
financial statement periods are reflected on that basis. Based on this evaluation, we have determined that we have two operating segments: Zero Emission Vehicles and Maintenance Services. The Zero
Emission Vehicles segment represents the sale of vehicles we assemble. The Maintenance Services segment represents our activities in connection with the servicing of diesel and electric engines for
customers in the United Kingdom and the sale and lease of forklifts.
We
measure our segments' performance based on segment income (loss). Segment income (loss) is comprised of the segment gross loss as well as selling, general and administrative costs
directly attributable to the segment. In management's evaluation of performance, certain costs, such as compensation for administrative staff and executive management, are not allocated by segment
and, accordingly, the following segment results do not include such unallocated costs. Assets reported within a segment are those assets that can be identified to a segment and primarily consist of
inventories, accounts receivables, property, plant and equipment and certain other assets. Cash and cash equivalents and certain other assets are not allocated to our segments.
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND
2010 IS UNAUDITED.)
(16) Information about Segments and Geographic Areas (Continued)
Following
is a summary of segment information for the years ended December 31, 2010, 2009, and 2008 and the six months ended June 30, 2011 and 2011 (unaudited) (in
thousands). Intersegment revenue relates primarily to the sale of parts by the Zero Emission Vehicles segment to the Maintenance Services segment and to the provision of services by the Maintenance
Services segment on behalf of the Zero Emission Vehicles segment. Intersegment parts and services are provided at cost.
Year ended December 31, 2010
Zero Emission
Vehicles
Maintenance
Services
Total
Revenue from external customers
$
21,783
$
13,811
$
35,594
Intersegment revenue
1,783
2,789
4,572
Depreciation and amortization
547
288
835
Segment (loss)
(15,083
)
(699
)
(15,782
)
Segment assets
22,606
2,800
25,406
Segment capital expenditures
1,403
159
1,562
Year ended December 31, 2009
Zero Emission
Vehicles
Maintenance
Services
Total
Revenue from external customers
$
5,045
$
17,809
$
22,854
Intersegment revenue
2,502
3,152
5,654
Depreciation and amortization
240
299
539
Segment (loss) income
(10,192
)
902
(9,290
)
Segment assets
7,754
4,274
12,028
Segment capital expenditures
314
—
314
Year ended December 31, 2008
Zero Emission
Vehicles
Maintenance
Services
Total
Revenue from external customers
$
8,597
$
23,777
$
32,374
Intersegment revenue
444
545
989
Depreciation and amortization
89
344
433
Segment (loss) income
(20,419
)
994
(19,425
)
Segment capital expenditures
228
143
371
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND
2010 IS UNAUDITED.)
(16) Information about Segments and Geographic Areas (Continued)
Six months ended June 30, 2011 (unaudited)
Zero Emission
Vehicles
Maintenance
Services
Total
Revenue from external customers
$
30,983
$
6,619
$
37,602
Intersegment revenue
653
1,367
2,020
Depreciation and amortization
380
157
537
Segment (loss) income
(12,621
)
(495
)
(13,116
)
Segment assets
23,122
2,480
25,602
Segment capital expenditures
1,485
58
1,543
Six months ended June 30, 2010 (unaudited)
Zero Emission
Vehicles
Maintenance
Services
Total
Revenue from external customers
$
8,249
$
7,575
$
15,824
Intersegment revenue
1,034
1,448
2,482
Depreciation and amortization
187
145
332
Segment (loss) income
(4,941
)
(107
)
(5,048
)
Segment capital expenditures
360
127
487
Following
is a reconciliation of our segment (loss) to net loss before income taxes (in thousands):
December 31,
June 30,
2010
2009
2008
2011
2010
(Unaudited)
Segment (loss)
$
(15,782
)
$
(9,290
)
$
(19,425
)
$
(13,116
)
$
(5,048
)
Selling, general and administrative—corporate and unallocated
(9,085
)
(7,452
)
(2,885
)
(3,545
)
(2,503
)
Interest expense
(3,699
)
(696
)
—
(1,881
)
(1,225
)
Loss on extinguishment of debt
—
—
—
(971
)
—
Other expense, net
(1,698
)
(60
)
—
(1,763
)
(745
)
Net loss
$
(30,264
)
$
(17,498
)
$
(22,310
)
$
(21,276
)
$
(9,521
)
Following
are total assets by segment (in thousands):
December 31,
June 30,
2010
2009
2011
(Unaudited)
Total for reportable segments
$
25,406
$
12,028
$
25,602
Corporate and unallocated
4,917
4,306
12,792
Total
$
30,323
$
16,334
$
38,394
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND
2010 IS UNAUDITED.)
(16) Information about Segments and Geographic Areas (Continued)
Following
is a reconciliation of our capital expenditures by segment (in thousands):
December 31,
June 30,
2010
2009
2008
2011
2010
(Unaudited)
Total for reportable segments
$
1,562
$
314
$
371
$
1,543
$
487
Corporate and unallocated
100
490
153
164
325
Total
$
1,662
$
804
$
524
$
1,707
$
812
Following
is a reconciliation of our depreciation and amortization expense by segment (in thousands):
December 31,
June 30,
2010
2009
2008
2011
2010
(Unaudited)
Total for reportable segments
$
835
$
539
$
433
$
537
$
332
Corporate and unallocated
288
303
394
206
148
Total
$
1,123
$
842
$
827
$
743
$
480
Geographic regions
Information regarding our geographic regions is presented in the tables below (in thousands). Revenue by geography is based on the
location the vehicle is assembled or the service is provided.
Revenue
December 31,
June 30,
2010
2009
2008
2011
2010
(Unaudited)
United States
$
13,975
$
176
$
—
$
25,464
$
3,892
United Kingdom
21,619
22,678
32,374
12,138
11,932
Total
$
35,594
$
22,854
$
32,374
$
37,602
$
15,824
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND
2010 IS UNAUDITED.)
(16) Information about Segments and Geographic Areas (Continued)
Long-lived Assets
December 31,
June 30
2010
2009
2011
(Unaudited)
United States
$
2,316
$
1,395
$
3,478
United Kingdom
1,715
2,211
1,622
Total
$
4,031
$
3,606
$
5,100
(17) Significant Customers
Following is a summary of revenue, as a percent of combined revenue, by major customer:
2010
2009
2008
June 30, 2011
(Unaudited)
Customer A—Zero Emission Vehicles
16
%
—
%
—
%
6
%
Customer B—Maintenance Services
15
%
32
%
33
%
6
%
Customer C—Maintenance Services
8
%
17
%
8
%
3
%
Customer D—Zero Emission Vehicles
8
%
—
%
—
%
56
%
Total
47
%
49
%
41
%
71
%
Accounts
receivable from these customers, as a percent of total accounts receivable, amounted to 40%, 20% and 37% as of December 31, 2010, December 31, 2009 and
June 30, 2011, respectively.
(18) Subsequent Events
Senior note financing
On September 14, 2011, we issued a $2.8 million senior unsecured note, or the senior note, to one of our existing
stockholders. The senior note accrued interest at 8.00% per annum and had a maturity date of December 31, 2011. We exchanged this note in connection with our 2011 convertible notes financing
discussed below.
2011 convertible notes financing
Between October 7, 2011 and October 31, 2011, we issued and sold in a private placement senior unsecured convertible
promissory notes, or 2011 convertible notes, and seven-year warrants to purchase 726,960 shares of our common stock to 31 investors for aggregate proceeds of $30.0 million,
consisting of cash proceeds of $25.2 million, cancellation of the $2.8 million of indebtedness under the senior note and the conversion of approximately $2.0 million of the
outstanding balance of the purchase price we owe to Tanfield in connection with the acquisition of our Smith UK business. Each convertible note had a maturity date that was three years from its date
of issuance and accrued interest at a per annum rate of 8.50%, 12.00% and 15.00% for the first, second and third year of its term, respectively. The
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Smith Electric Vehicles Corp.
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008. INFORMATION AS OF JUNE 30, 2011 AND FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND
2010 IS UNAUDITED.)
(18) Subsequent Events (Continued)
2011
convertible notes converted into shares of our Series C convertible redeemable preferred stock, par value $0.001 per share, or the Series C preferred stock, upon our receipt of
$30.0 million of proceeds from the 2011 convertible notes financing. Each warrant is exercisable at any time for the number of shares of our common stock equal to 30% of the initial principal
amount of the related note divided by the exercise price of $12.38 and is automatically exercised on a net exercise basis upon the pricing of an initial public offering of our common stock.
Series C preferred stock issuance
Between November 3, 2011 and November 8, 2011, we issued 2,431,170 shares of our Series C preferred stock in
connection with the conversion of all of our outstanding 2011 convertible notes. We did not receive any additional cash proceeds upon the conversion of the 2011 convertible notes into Series C
preferred stock.
Name change and increase in authorized capital
During November 2011, the company name was changed from "Smith Electric Vehicles US Corp." to "Smith Electric
Vehicles Corp." We also increased the number of authorized common shares from 20.0 million to 200.0 million and increased the number of authorized preferred shares from
6.6 million to 7.3 million.
Warrant cancellation
During November 2011, we and Tanfield agreed to cancel the warrant under which Tanfield had the right to acquire additional shares of
common stock.
Stock option grants
Subsequent to June 30, 2011, we granted options, primarily to our employees, to purchase an aggregate of approximately 940,000
shares of or common stock with an exercise price in the range of $12.04 to $12.38 per share.
Evaluation Period
We have evaluated subsequent events from January 1, 2011 through November 9, 2011.
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Until                        , 2011
(25 days after commencement of this offering), all dealers that buy, sell, or trade shares of our
common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or subscriptions.
Table of Contents
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution.
Set forth below are the expenses (other than underwriting discounts and commissions) expected to be incurred by the registrant in
connection with the issuance and distribution of the securities registered hereby. With the exception of the Securities and Exchange Commission, or SEC, registration fee, the Financial Industry
Regulatory Authority, or FINRA, filing fee and The Nasdaq Global Market listing fee, the amounts set forth below are estimates.
SEC registration fee
$
14,325
FINRA filing fee
$
13,000
Nasdaq Global Market listing fee
*
Printing and engraving expenses
*
Fees and expenses of legal counsel
*
Accounting fees and expenses
*
Blue sky fees and expenses (including related legal fees)
Transfer agent and registrar fees
*
Miscellaneous
*
Total
$
*
*
To
be provided by amendment
Item 14.
Indemnification of Directors and Officers.
Section 102 of the Delaware General Corporation Law, or the DGCL, permits a corporation to eliminate the personal liability of
its directors or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his or her duty of loyalty, failed to act in good faith, engaged
in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal
benefit. Our certificate of incorporation that will be in effect upon the closing of this offering provides that no director shall be personally liable to us or our stockholders for monetary damages
for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the DGCL prohibits the elimination or limitation of liability of
directors for breaches of fiduciary duty.
Section 145
of the DGCL provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the
request of the corporation in related capacities against expenses (including attorneys' fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by the person in
connection with an action, suit or proceeding to which he or she is or is threatened to be made a party by reason of such position, if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful,
except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all
of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
II-1
Table of Contents
Our
by-laws that will be in effect upon the closing of this offering, or our Amended and Restated By-laws, provide that we will indemnify each person who was or
is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in
the right of us) by reason of the fact that he or she is or was, or has agreed to become, our director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer,
partner, employee or trustee, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to as an "Indemnitee"), or by
reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to,
our best interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful.
Our
Amended and Restated By-laws also provide that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of us to procure a judgment
in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, our director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer,
partner, employee or trustee or, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or
omitted in such capacity, against all expenses (including attorneys' fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such
action, suit or proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, except that
no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such
adjudication but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful,
on the merits or otherwise, he or she will be indemnified by us against all expenses (including attorneys' fees) actually and reasonably incurred by him or her or on his or her behalf in connection
therewith. If we do not assume the defense of any such action or suit, expenses must be advanced to an Indemnitee under certain circumstances.
Our
Amended and Restated By-laws prohibit us from retroactively amending the by-law provisions discussed above to reduce our indemnification obligations to our
directors, officers, employees and agents thereunder.
Our
policy is to enter into separate indemnification agreements with each of our directors and officers that provide the maximum indemnity allowed to directors and executive officers by
Section 145 of the DGCL and also provide for certain additional procedural protections. These indemnification provisions and the indemnification agreements entered into between us and our
officers and directors may be sufficiently broad to permit indemnification of our officers and directors for liabilities (including reimbursement of expenses incurred) arising under the Securities Act
of 1933.
We
maintain a general liability insurance policy which covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as
directors or officers.
Certain
of our non-employee directors may, through their relationships with their employers, be insured and/or indemnified against certain liabilities in their capacity as
members of our board of directors.
The
underwriting agreement we will enter into in connection with the offering of common stock being registered hereby provides that the underwriters will indemnify, under certain
conditions, our directors and officers (as well as certain other persons) against certain liabilities arising in connection with such offering.
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Item 15.
Recent Sales of Unregistered Securities.
Within the past three years, the registrant has issued and sold the following unregistered securities:
(a)   Equity Units, Debt and Preferred Stock
•
Between March 20, 2009 and January 12, 2010, the registrant issued and sold 111.25 units, each consisting of
a Series A 10% secured convertible debenture in the principal amount of $100,000 and 6,666 shares of the registrant's common stock to 36 investors at a purchase price of $100,000 per unit for
aggregate proceeds of $11,125,040. An aggregate of 741,595 shares of common stock were issued in this placement. Each Series A debenture is convertible in connection with a reorganization or
initial public offering of the registrant into the registrant's common stock, par value $0.001 per share, or common stock, on the terms set forth in such Series A debentures. Each holder of a
Series A debenture has the option to convert such debenture upon the closing of the offering contemplated by this registration statement into the number of shares of common stock equal to 100%
of the principal amount of and all accrued and unpaid interest on such debenture divided by 80% of the public offering price of the common stock sold in this offering.
•
Between March 2, 2010 and October 30, 2010, the registrant issued and sold 28,300 units consisting of a
convertible promissory bridge note in the principal amount of $500,000 and a two-year warrant to purchase shares of the class of our equity securities into which the bridge notes were
convertible to 26 investors, for aggregate proceeds of $14,150,000. The number of shares for which the warrant could be exercised was 25% of the number of shares into which the bridge note was
convertible. The bridge notes were convertible and the warrants were exercisable in connection with an equity offering pursuant to which the registrant received gross proceeds of at least
$20.0 million, or a qualified offering, for shares of the class of equity securities issued in such qualified offering at a price equal to the offering price of such equity securities.
•
Between January 11, 2011 and March 7, 2011, the registrant sold an aggregate of 3,239,202.6576 shares of its
Series B convertible redeemable preferred stock, par value $0.001 per share, or Series B preferred stock, to 53 investors at a purchase price of $12.04 per share for aggregate proceeds
of $39.0 million.
•
Between January 11, 2011 and March 7, 2011, the registrant issued an aggregate of 1,569,804.48 shares of its
Series B preferred stock to the holders of the registrant's convertible promissory bridge notes and related warrants described above upon (i) the conversion of all but approximately
$171,167 (which the registrant paid in cash) of such convertible promissory bridge notes at the conversion price of $12.04 per share and (ii) the cashless exercise of all such warrants.
•
On September 14, 2011, the registrant issued a $2.8 million senior unsecured note, or the senior note, to an
existing stockholder. The senior note accrued interest at 8.00% per annum and had a maturity date of December 31, 2011. The senior note was automatically convertible into shares of the
registrant's equity securities immediately prior to the closing of the initial public offering of the registrant's common stock and was redeemable by the registrant upon the closing of a private
placement of equity securities of the registrant that provides the registrant with at least $20.0 million in net proceeds.
•
Between October 7, 2011 and October 31, 2011, the registrant issued and sold senior unsecured convertible
notes, or 2011 convertible notes, having an aggregate principal amount of $30.0 million and seven-year warrants to purchase 726,960 shares of the registrant's common stock to 31
investors for aggregate proceeds of $30.0 million. The senior note was exchanged for a convertible note having a principal amount of $2.8 million and a warrant to purchase 67,581
II-3
Table of Contents
shares
of common stock. The aggregate proceeds also consisted of $25.2 million and the conversion of approximately $2.0 million of the outstanding balance of the purchase price the
registrant owed to Tanfield Group Plc, or Tanfield, in connection with the acquisition of the registrant's Smith UK business. Each convertible note had a maturity date that was three years from
its date of issuance and accrued interest at a per annum rate of 8.50%, 12.00% and 15.00% for the first, second and third year of its term, respectively. Each 2011 convertible note provided for
automatic conversion into shares of the registrant's equity securities upon the earliest to occur of (i) the issuance of 2011 convertible notes resulting in net proceeds to the registrant of at
least $30.0 million, in which case the 2011 convertible notes would convert into shares of the registrant's Series C convertible redeemable preferred stock, par value $0.001 per share,
or Series C preferred stock, par value $0.001 per share, or Series C preferred stock, (ii) the first sale of any class of the registrant's equity securities that results in net
proceeds to the registrant, when added to the net proceeds received by the registrant from the issuance and sale of the convertible notes, of at least $30.0 million, in which case the 2011
convertible notes would convert into shares of the equity securities issued in such offering, and (iii) the pricing of an initial public offering of the registrant's common stock that results
in net proceeds to the registrant of at least $50.0 million. The 2011 convertible notes may be prepaid at any time using cash flow generated from the registrant's operations. Each warrant can
be exercised at any time, for a purchase price of $12.38 per share, for the number of shares of the registrant's common stock equal to 30% of the initial principal amount of the related convertible
note divided by $12.38. Each warrant automatically will be exercised upon the pricing of an initial public offering of common stock, at a purchase price per share equal to the price at which the
common stock is offered to the public in such offering.
•
Between November 3, 2011 and November 8, 2011, the registrant issued 2,431,170 shares of its Series C
preferred stock in connection with the conversion of all of the registrant's outstanding 2011 convertible notes. The registrant did not receive any additional cash proceeds upon the conversion of the
2011 convertible notes into Series C preferred stock.
(b)   Common Stock
•
On January 16, 2009, the registrant issued 4,409,549 shares of its common stock to Tanfield as consideration for
the entry by a subsidiary of Tanfield into a license agreement with the registrant.
•
On January 16, 2009, the registrant issued 3,128,257 shares of its common stock to the registrant's chief executive
officer as consideration for services rendered in connection with the organization of the registrant. Of these shares, 1,998,800 were subject to forfeiture if the executive was not appointed chairman
of the registrant's board of directors on or before December 31, 2009 and were forfeited on December 18, 2009 upon the appointment of Roy Stanley as chairman.
•
On January 16, 2009, the registrant issued 664,220 shares of its common stock to the registrant's chief technology
officer as consideration for services rendered in connection with the organization of the registrant.
•
On January 16, 2009, the registrant issued 797,063 shares of its common stock to Wynston Hill Capital, LLC
as consideration for financial advice and consulting services rendered in connection with the organization of the registrant and development of the registrant's business plan.
•
On December 18, 2009, the registrant issued 1,998,800 shares of its common stock to the then-chairman
of the registrant's board of directors as consideration under a services agreement between the registrant and such individual, dated December 18, 2009.
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Table of Contents
•
On March 12, 2010, the registrant issued 640,468 shares of its common stock to Tanfield upon the cashless exercise
of Tanfield's warrant issued on August 5, 2009 and amended December 18, 2009, described in paragraph (c) of this Item 15.
(c)   Warrants
•
On August 5, 2009, the registrant issued a five-year warrant to Tanfield, which was amended on
December 18, 2009. As amended, the warrant provided Tanfield with the right to purchase a number of shares of the registrant's common stock equal to 49% of (i) the number of shares of
common stock issued and vested pursuant to the registrant's 2009 Incentive Compensation Plan, (ii) the number of shares of common stock issued to the investors in the registrant's
series A financing for amounts invested between $7.5 million and $10.0 million, (iii) the number of shares of common stock issued to the investors in the registrant's
series A financing for amounts invested between $10.0 million and $15.0 million, provided that such amounts were invested on or prior to August 7, 2009, and (iv) the
number of shares of common stock issued to Roy Stanley pursuant to his services agreement with the registrant. The warrant had an exercise price of $0.01 per share and was exercisable on a cashless
basis. The registrant and Tanfield terminated this warrant effective November 4, 2011.
(d)   Options
•
On December 18, 2009, the registrant granted to certain of its executive officers options to purchase an aggregate
of 513,376 shares of its common stock in accordance with incentive stock option agreements that the registrant entered into with such officers. Each of these options has an exercise price of $0.73 per
share.
•
On April 29, 2011, the registrant granted to certain of its officers and certain officers of its subsidiary options
to purchase an aggregate of 458,000 shares of its common stock in accordance with non-qualified stock option agreements that the registrant entered into with such officers. Each of these
options has an exercise price of $12.04 per share. The options will vest upon the date specified in each officer's non-qualified stock option agreement, each date being between
November 22, 2012 and March 8, 2013, or immediately upon a change of control of the registrant or the completion of the offering contemplated by this registration statement or the
existence of good reason as defined in the applicable award agreement.
•
On July 20, 2011, the registrant granted to its vice president of global operations an option to purchase 128,000
shares of its common stock in accordance with a non-qualified stock option agreement that the registrant entered into with such officer. This option has an exercise price of $12.04 per
share, and will vest on May 13, 2013 or immediately upon a change of control of the registrant or the completion of the offering contemplated by this registration statement or the existence of
good reason as defined in the applicable award agreement.
•
Between November 5, 2011 and November 8, 2011, the registrant granted to certain of its suppliers options to
purchase an aggregate of 80,000 shares of its common stock in accordance with non-qualified stock option agreements that the registrant entered into with such vendors and consultant. Each
of these options has an exercise price of $12.38 per share. The options will vest upon the date specified in each non-qualified stock option agreement, or immediately upon a change of
control of the registrant or the completion of the offering contemplated by this registration statement.
•
On November 4, 2011, the registrant granted to certain of its executive officers options to purchase an aggregate
of 730,000 shares of its common stock in accordance with a non-qualified stock option agreement that the registrant entered into with each such officer. Each option has an exercise price
of $12.38 per share and will vest as to 50% of the shares of common stock
II-5
Table of Contents
covered
by the option on November 4, 2012 and as to the remaining 50% of the covered shares on November 4, 2013. Vesting of the options will accelerate upon a change in control of the
registrant or the existence of good reason as defined in the applicable award agreement.
(e)   Restricted Stock
•
On April 29, 2011, the registrant granted to certain of its officers 126,777 restricted shares of its common stock
in accordance with restricted stock agreements that the registrant entered into with such officers. These restricted shares of common stock will vest in November 2012, or immediately upon a change of
control of the registrant or the completion of the offering contemplated by this registration statement or the existence of good reason as defined in the applicable award agreement.
The
securities described in paragraphs (a), (b) and (c) of this Item 15 were issued in reliance on the exemption provided by Section 4(2) of the
Securities Act of 1933 and, in certain cases, in reliance on Regulation D and Regulation S promulgated thereunder, as transactions by an issuer not involving a public offering. The
purchasers of the securities in these transactions represented that they were accredited investors and that they were acquiring the securities for investment purposes only and not with a view toward
the public sale or distribution thereof. Such purchasers received written disclosures that the securities had not been registered under the Securities Act of 1933, as amended, and that any resale must
be made pursuant to a registration statement or an available exemption from registration. All purchasers either received adequate financial statement or non-financial statement information
about the registrant or had adequate access, through their relationship with the registrant, to financial statement or non-financial statement information about the registrant. The sale of
these securities was made without general solicitation or advertising.
The
securities described in paragraphs (d) and (e) of this Item 15 were issued pursuant to written compensatory plans or arrangements with our employees, directors
and consultants in reliance on the
exemption provided by Section 4(2) of the Securities Act of 1933 or on the exemption provided by Section 3(b) of the Securities Act of 1933 and Rule 701 promulgated thereunder.
All
securities described in this Item 15 are deemed restricted securities for purposes of the Securities Act. The instruments representing such issued securities included
appropriate legends setting forth that the securities had not been registered and the applicable restrictions on transfer. There were no underwriters employed in connection with any of the
transactions set forth in this Item 15.
Item 16.
Exhibits and Financial Statement Schedules
(A)  Exhibits
The following documents are filed as exhibits to this registration statement:
Exhibit
Number
Description
1.1
*
Form of Underwriting Agreement
2.1
Business Purchase Agreement, dated January 1, 2011, among the Registrant, Smith Electric Vehicles Europe Limited, SEV Group Limited, Tanfield Engineering Systems Limited, Norquip Limited and Tanfield
Group Plc
3.1
Third Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect
3.2
Certificate of Amendment to Third Amended and Restated Certificate of Incorporation of the Registrant, effective November 4, 2011
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Table of Contents
Exhibit
Number
Description
3.3
Form of Fourth Amended and Restated Certificate of Incorporation of the Registrant, to be effective upon the closing of the offering
3.4
By-Laws of the Registrant, as currently in effect
3.5
Form of Amended and Restated By-Laws of the Registrant, to be effective upon the closing of the offering
4.1
*
Specimen common stock certificate of the Registrant
4.2
Amended and Restated Investor Rights Agreement, dated as of November 3, 2011, between Registrant and certain holders of the Registrant's capital stock named therein
4.3
*
Rights Plan, dated                       , 2011, between the Registrant and
5.1
*
Opinion of Covington & Burling LLP
10.1
Form of Indemnification Agreement between the Registrant and its Officers and Directors
10.2
2009 Incentive Compensation Plan
10.3
Form of Non-Qualified Option Agreement under 2009 Incentive Compensation Plan
10.4
Form of Restricted Stock Agreement under 2009 Incentive Compensation Plan
10.5
Form of Non-Qualified Option Agreement outside 2009 Incentive Compensation Plan
10.6
Form of Non-Qualified Option Agreement outside 2009 Incentive Compensation Plan
10.7
2012 Incentive Plan
10.8
Form of Incentive Stock Option Agreement under 2012 Incentive Plan
10.9
Form of Nonstatutory Stock Option Agreement under 2012 Incentive Plan
10.10
Employment Agreement, dated November 2, 2011, between the Registrant and Bryan Hansel
10.11
Employment Agreement, dated November 1, 2009, between the Registrant and Kevin Kelly
10.12
Employment Agreement, dated September 14, 2011, between the Registrant and Kevin Neal
10.13
Employment Agreement, dated September 14, 2011, between the Registrant and Jacques D. Schira
10.14
Employment Agreement, dated September 14, 2011, between the Registrant and Paul R. Geist
10.15
Employment Agreement, dated September 14, 2011, between the Registrant and Angela Strand Boydston.
10.16
Employment Agreement, dated November 8, 2011, between Smith Electric Vehicles Europe Limited and Robin Mackie.
10.17
Production Space Lease, dated March 12, 2009, between the Registrant and Kansas City, Missouri
10.18
Office Lease, dated March 12, 2009, by and between the Registrant and Kansas City, Missouri
10.19
License to Occupy, dated as of January 1, 2011, between Smith Electric Vehicles Europe Limited and Tanfield Group Plc
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Table of Contents
Exhibit
Number
Description
10.20
*†
Supply Agreement, dated October 7, 2010, between the Registrant and AVIA Ashok Leyland Motors s.r.o.
10.21
*†
Product Sales Agreement, effective as of March 16, 2011, between the Registrant and A123 Systems, Inc.
10.22
*†
Development, Supply, and License Agreement, dated September 30, 2010, between the Registrant and Impact Clean Power Technology S.A., formerly Clean Power Technical Solutions Sp. z.o.o.
10.23
*†
Licensing and Manufacturing Agreement, dated November 5, 2011, between the Registrant and Magnetic Systems Technology Limited
10.24
*†
Development, Supply, and License Agreement, dated January 1, 2011, between the Registrant and Sensor-Technik UK Ltd.
10.25
*
Assistance Agreement, dated April 1, 2010, between the Registrant and the United States Department of Energy/NETL Morgantown Campus
10.26
*†
Fleet Maintenance Agreement, dated October 13, 2005, between Smith Electric Vehicles Europe Limited (as successor-in-interest to SEV Group Ltd) and Dairy Crest Limited
21.1
List of subsidiaries of the Registrant
23.1
Consent of Deloitte & Touche LLP
23.2
Consent of Deloitte LLP
23.3
*
Consent of Covington & Burling LLP (contained in Exhibit 5.1)
24.1
Powers of Attorney (included on signature pages of this Registration Statement)
*
To
be filed by amendment
†
Portions
of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential treatment
request under Rule 406 of the Securities Act of 1933, as amended.
(B)  Financial Statement Schedules
All schedules are omitted because they are not applicable or the required information is included in the financial statements or notes thereto.
Item 17.
Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being
registered, the registrant will, unless
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Table of Contents
in
the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of such issue.
The
undersigned registrant hereby undertakes that:
(1)
For
purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2)
For
the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus
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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Smith Electric Vehicles Corp. has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Kansas City, State of Missouri, on the 9th day of November, 2011.
SMITH ELECTRIC VEHICLES CORP.
By
/s/ BRYAN L. HANSEL
Name:  Bryan L. Hansel
Title:
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Bryan L. Hansel,
Paul R. Geist and Jacques D. Schira, and each of them severally, his true and lawful attorney or attorneys-in-fact and agents, with full power to act with or
without the others and with full power of substitution and resubstitution, to execute in his name, place and stead, in any and all capacities, any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same, with all supplements and exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents and each of them, full power and authority to do and perform in the name of on behalf of the
undersigned, in any and all capacities, each and every act and thing necessary or desirable to be done in and about the premises, to all intents and purposes and as fully as they might or could do in
person, hereby ratifying, approving and confirming all that said attorneys-in-fact and agents or their substitutes may lawfully do or cause to be done by virtue hereof.
*
* * *
Pursuant
to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/ BRYAN L. HANSEL
Bryan L. Hansel
Chief Executive Officer and Director
(Principal Executive Officer)
November 9, 2011
/s/ PAUL R. GEIST
Paul R. Geist
Chief Financial Officer
(Principal Financial Officer)
November 9, 2011
/s/ DOUGLAS FLEMING
Douglas Fleming
Controller
(Principal Accounting Officer)
November 9, 2011
/s/ JOHN N. BRIDGE
John N. Bridge
Director
November 9, 2011
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Table of Contents
Signature
Title
Date
/s/ ROBERT J. DRUTEN
Robert J. Druten
Director
November 9, 2011
/s/ DARREN KELL
Darren Kell
Director
November 9, 2011
/s/ ROBIN J. MACKIE
Robin J. Mackie
Chief Technology Officer and Director
November 9, 2011
/s/ THOMAS T. STALLKAMP
Thomas T. Stallkamp
Director
November 9, 2011
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Table of Contents
EXHIBIT INDEX
Exhibit Number
Description
1.1
*
Form of Underwriting Agreement
2.1
Business Purchase Agreement, dated January 1, 2011, among the Registrant, Smith Electric Vehicles Europe Limited, SEV Group Limited, Tanfield Engineering Systems Limited, Norquip Limited and Tanfield
Group Plc
3.1
Third Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect
3.2
Certificate of Amendment to Third Amended and Restated Certificate of Incorporation of the Registrant, effective November 4, 2011
3.3
Form of Fourth Amended and Restated Certificate of Incorporation of the Registrant, to be effective upon the closing of the offering
3.4
By-Laws of the Registrant, as currently in effect
3.5
Form of Amended and Restated By-Laws of the Registrant, to be effective upon the closing of the offering
4.1
*
Specimen common stock certificate of the Registrant
4.2
Amended and Restated Investor Rights Agreement, dated as of November 3, 2011, between Registrant and certain holders of the Registrant's capital stock named therein
4.3
*
Rights Plan, dated                        , 2011, between the Registrant and
5.1
*
Opinion of Covington & Burling LLP
10.1
Form of Indemnification Agreement between the Registrant and its Officers and Directors
10.2
2009 Incentive Compensation Plan
10.3
Form of Non-Qualified Option Agreement under 2009 Incentive Compensation Plan
10.4
Form of Restricted Stock Agreement under 2009 Incentive Compensation Plan
10.5
Form of Non-Qualified Option Agreement outside 2009 Incentive Compensation Plan
10.6
Form of Non-Qualified Option Agreement outside 2009 Incentive Compensation Plan
10.7
2012 Incentive Plan
10.8
Form of Incentive Stock Option Agreement under 2012 Incentive Plan
10.9
Form of Nonstatutory Stock Option Agreement under 2012 Incentive Plan
10.10
Employment Agreement, dated November 2, 2011, between the Registrant and Bryan Hansel
10.11
Employment Agreement, dated November 1, 2009, between the Registrant and Kevin Kelly
10.12
Employment Agreement, dated September 14, 2011, between the Registrant and Kevin Neal
10.13
Employment Agreement, dated September 14, 2011, between the Registrant and Jacques D. Schira
10.14
Employment Agreement, dated September 14, 2011, between the Registrant and Paul R. Geist
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Table of Contents
Exhibit Number
Description
10.15
Employment Agreement, dated September 14, 2011, between the Registrant and Angela Strand Boydston
10.16
Employment Agreement, dated November 8, 2011, between Smith Electric Vehicles Europe Limited and Robin Mackie
10.17
Production Space Lease, dated March 12, 2009, between the Registrant and Kansas City, Missouri
10.18
Office Lease, dated March 12, 2009, by and between the Registrant and Kansas City, Missouri
10.19
License to Occupy, dated as of January 1, 2011, between Smith Electric Vehicles Europe Limited and Tanfield Group Plc
10.20
*†
Supply Agreement, dated October 7, 2010, between the Registrant and AVIA Ashok Leyland Motors s.r.o.
10.21
*†
Product Sales Agreement, effective as of March 16, 2011, between the Registrant and A123 Systems, Inc.
10.22
*†
Development, Supply, and License Agreement, dated September 30, 2010, between the Registrant and Impact Clean Power Technology S.A., formerly Clean Power Technical Solutions Sp. z.o.o.
10.23
*†
Licensing and Manufacturing Agreement, dated November 5, 2011, between the Registrant and Magnetic Systems Technology Limited
10.24
*†
Development, Supply, and License Agreement, dated January 1, 2011, between the Registrant and Sensor-Technik UK Ltd.
10.25
*
Assistance Agreement, dated April 1, 2010, between the Registrant and the United States Department of Energy/NETL Morgantown Campus
10.26
*†
Fleet Maintenance Agreement, dated October 13, 2005, between Smith Electric Vehicles Europe Limited (as successor-in-interest to SEV Group Ltd) and Dairy Crest Limited
21.1
List of subsidiaries of the Registrant
23.1
Consent of Deloitte & Touche LLP
23.2
Consent of Deloitte LLP
23.3
*
Consent of Covington & Burling LLP (contained in Exhibit 5.1)
24.1
Powers of Attorney (included on signature pages of this Registration Statement)
*
To
be filed by amendment
†
Portions
of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission pursuant to a confidential
treatment request under Rule 406 of the Securities Act of 1933, as amended.
II-13