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<TITLE>S-1</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>As filed with the Securities and Exchange Commission on
    July&#160;2, 2009</B>
</DIV>

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<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Registration
    <FONT style="white-space: nowrap">No.&#160;333-&#160;&#160;&#160;&#160;&#160;&#160;</FONT></B>
</DIV>

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<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

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    <B><FONT style="font-size: 14pt">UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION<BR>
    </FONT><FONT style="font-size: 12pt">Washington,&#160;D.C.
    20549</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

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<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 18pt"><FONT style="white-space: nowrap">Form&#160;S-1</FONT></FONT></B>
</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 12pt">REGISTRATION STATEMENT<BR>
    UNDER<BR>
    THE SECURITIES ACT OF 1933</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

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<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 24pt">VUZIX CORPORATION</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">(Exact name of registrant as
    specified in its charter)</FONT></I>
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
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<TR style="font-size: 1pt" valign="bottom">
    <TD width="34%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="32%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="32%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
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<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
    <B><FONT style="font-size: 9pt">Delaware</FONT></B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B><FONT style="font-size: 9pt">3577</FONT></B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B><FONT style="font-size: 9pt">04-3392453</FONT></B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="center" valign="top">
    <I><FONT style="font-size: 8pt">(State or other jurisdiction
    of<BR>
    incorporation or organization)</FONT></I>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <I><FONT style="font-size: 8pt">(Primary Standard Industrial<BR>
    Classification Code Number)</FONT></I>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <I><FONT style="font-size: 8pt">(I.R.S. Employer<BR>
    Identification Number) </FONT></I>
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 8pt">75 Town Centre Drive<BR>
    Rochester, NY 14623<BR>
    <FONT style="white-space: nowrap">(585)&#160;359-5900</FONT><BR>
    </FONT></B><I><FONT style="font-size: 7pt">(Address, including
    zip code, and telephone number, including area code, of
    registrant&#146;s principal executive offices)</FONT></I>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

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<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><I><FONT style="font-size: 9pt">Copies to:</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
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    <TD width="50%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
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    <TD width="49%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
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<TR valign="bottom">
<TD align="center" valign="top">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Robert F. Mechur,&#160;Esq.<BR>
    Boylan, Brown, Code, Vigdor&#160;&#038; Wilson, LLP<BR>
    2400 Chase Square<BR>
    Rochester, New York 14604<BR>
    <FONT style="white-space: nowrap">(585)&#160;232-5300</FONT></B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <B>Kenneth G. Sam,&#160;Esq.<BR>
    Jason Brenkert,&#160;Esq.<BR>
    Dorsey &#038; Whitney LLP<BR>
    370 17th&#160;Street, Suite 470<BR>
    Denver, Colorado  80202<BR>
    (303) 629-3400</B>
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Approximate date of commencement of proposed sale to the
    public:</B>&#160;&#160;As soon as practicable after the
    effective date of this registration statement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If any of the securities being registered on this form are to be
    offered on a delayed or continuous basis pursuant to
    Rule&#160;415 under the Securities Act, check the following
    box.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#254;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this form is filed to register additional securities for an
    offering pursuant to Rule&#160;462(b) under the Securities Act,
    check the following box and list the Securities Act registration
    statement number of the earlier effective registration statement
    for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this form is a post-effective amendment filed pursuant to
    Rule&#160;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.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If this form is a post-effective amendment filed pursuant to
    Rule&#160;462(d) under the Securities Act, check the following
    box and list the Securities Act registration number of the
    earlier effective registration statement for the same
    offering.&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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
    &#147;large accelerated filer,&#148; &#147;accelerated
    filer&#148; and &#147;smaller reporting company&#148; in
    <FONT style="white-space: nowrap">Rule&#160;12b-2</FONT>
    of the Exchange Act. (Check one):
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 7pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="16%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="10%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="11%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="10%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="26%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
    <TD width="10%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="17%">&nbsp;</TD>	<!-- colindex=04 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Large&#160;accelerated&#160;filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Accelerated&#160;filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Non-accelerated&#160;filer&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#111;
    </FONT>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    Smaller&#160;reporting&#160;company&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#254;
    </FONT>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    (Do&#160;not&#160;check&#160;if&#160;a&#160;smaller&#160;reporting&#160;company)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 5pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 7pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="80%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutterleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutterright -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutterleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutterright -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="2%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 6pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
    <B>Proposed Maximum<BR>
    </B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-top: 3px double #000000">
    <B>Amount of<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Aggregate<BR>
    </B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Registration<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
    <B>Title of Securities to be Registered</B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Offering Price(1)</B>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Fee</B>
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom" style="border-top: 1px solid #000000">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Units, each consisting of one share of Common Stock,
    $0.001&#160;par value, and one-half of one Common Stock Purchase
    Warrant(2)
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    15,464,625.00
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    862.93
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom" style="border-top: 1px solid #000000">
<DIV style="text-indent: -7pt; margin-left: 21pt">
    Shares of Common Stock included as part of the Units
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    &#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom" style="border-top: 1px solid #000000">
<DIV style="text-indent: -7pt; margin-left: 21pt">
    Common Stock Purchase Warrants included as part of the Units
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    &#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom" style="border-top: 1px solid #000000">
<DIV style="text-indent: -7pt; margin-left: 21pt">
    Shares of Common Stock underlying the Common Stock Purchase
    Warrant included in the Units
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    11,598,469.00
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
    (3)(5)
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    647.19
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom" style="border-top: 1px solid #000000">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Agent Compensation Options(4)
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom" style="border-top: 1px solid #000000">
<DIV style="text-indent: -7pt; margin-left: 21pt">
    Shares of Common Stock included as part of the Agent
    Compensation Options
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    1,933,079.00
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    107.87
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom" style="border-top: 1px solid #000000">
<DIV style="text-indent: -7pt; margin-left: 21pt">
    Common Stock Purchase Warrants included as part of the
    Compensation Options(5)
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    &#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom" style="border-top: 1px solid #000000">
<DIV style="text-indent: -7pt; margin-left: 21pt">
    Shares of Common Stock underlying the Common Stock Purchase
    Warrants included in the Compensation Options
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    1,449,808.00
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
    (3)(5)
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    80.90
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
<DIV style="text-indent: -7pt; margin-left: 14pt">
    <B>Total</B>
</DIV>
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    30,445,981.00
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-right: 1px solid #000000; padding-right: 2pt; border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    $
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 1px solid #000000">
    1698.89
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 1px solid #000000">
&nbsp;
</TD>
</TR>
<TR style="font-size: 1pt">
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom" style="border-top: 3px double #000000">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 7pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 7pt">Estimated solely for purposes of
    calculating the registration fee in accordance with Rule 457(o)
    under the Securities Act of 1933, as amended. In accordance with
    Rule&#160;457(o) under the Securities Act, the number of shares
    being registered and the maximum offering price per share are
    not included in this table.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 7pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 7pt">Public offering of units, each unit
    consisting of one share of common stock, $0.001&#160;par value,
    and one-half of one common stock purchase warrant.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 7pt">(3)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 7pt">Estimated pursuant to
    Rule&#160;457(g).
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 7pt">(4)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 7pt">The Canadian agents will receive
    options entitling the agents to purchase that number of shares
    of common stock and warrants equal to 12.5% of the aggregate
    number of shares of common stock and warrants sold under the
    offering, respectively (including the shares of common stock and
    warrants issued upon exercise of the over-allotment option), at
    the offering price per share and warrant, respectively, for a
    period of 12&#160;months from the closing date.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 7pt">(5)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 7pt">Pursuant to Rule&#160;416, there
    are also being registered such indeterminable additional
    securities as may be issued as a result of any additional shares
    of common stock that shall become issuable by reason of any
    stock dividend, stock split, recapitalization or other similar
    transaction effected without the receipt of consideration that
    results in an increase in the number of the outstanding shares
    of common stock.
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 16%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=504 length=84 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 2%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <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 a further amendment that
    specifically states that this Registration Statement shall
    thereafter become effective in accordance with Section&#160;8(a)
    of the Securities Act of 1933, as amended, or until the
    Registration Statement shall become effective on such date as
    the Commission, acting pursuant to said Section&#160;8(a), may
    determine.</B>
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=504 length=0 -->

<CENTER style="font-size: 1pt; width: 100%; border-bottom: 2pt solid #000000"></CENTER><!-- callerid=999 iwidth=504 length=0 -->

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 91%; margin-left: 4%"><!-- BEGIN PAGE WIDTH -->
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXPLANATORY
    NOTE</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This Registration Statement contains a prospectus relating to an
    offering of shares of our common stock, warrants and common
    stock acquirable upon exercise of warrants in the United States,
    together with separate prospectus pages relating to an offering
    of shares of our common stock, warrants and common stock
    acquirable upon exercise of warrants in Canada. The
    U.S.&#160;prospectus and the Canadian prospectus will be
    identical in all material respects. The complete
    U.S.&#160;prospectus is included herein and is followed by those
    pages to be used solely in the Canadian prospectus. Each of the
    alternate pages for the Canadian prospectus included in this
    registration statement has been labeled &#147;Alternate Page for
    Canadian Prospectus.&#148;
</DIV>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE style="color: #FF0000" width="100%" border="1" cellpadding="5"><!-- TABLE 03 --><TR><TD>
<FONT style="font-size: 9pt; font-family: Arial, Helvetica; color: #C41E3A">The
information in this 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 prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.<BR>
</FONT>
</TD></TR></TABLE>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 92%; margin-left: 4%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times; color: #C41E3A">(Subject
    to Completion) Dated June&#160;30, 2009</FONT></B>
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="color: #C41E3A">PRELIMINARY PROSPECTUS
    </FONT>
</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 21pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Vuzix
    Corporation<BR>
    <IMG src="o55928o5592800.gif" alt="(VUZIX CORPORATION LOGO)">
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 14pt">Up to&#160;&#149;&#160;
    Units</FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 9pt">(each consisting of one share of
    common stock and one half of one common stock purchase
    warrant)</FONT></B>
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This is the initial public offering of our securities in the
    United States and Canada. We are offering for sale up
    to&#160;&#149;&#160;units at a price per unit of
    Cdn$&#160;&#149;&#160;. Each unit consists of one share of our
    common stock, par value US$0.001 per share, and one half of one
    common stock purchase warrant. Each whole warrant entitles its
    holder to purchase one share of our common stock at a price of
    Cdn$&#160;&#149;&#160; per share at any time
    for&#160;&#149;&#160;months after the closing date of the
    offering. Our units are being offered to the public in each
    province of Canada other than Quebec by our Canadian agents,
    Canaccord Capital Corporation and Bolder Investment Partners,
    Ltd., under the terms of a prospectus filed with the securities
    authorities in each Canadian province other than Quebec and
    concurrently in the United States through selling agents,
    including Canaccord Adams Inc., a US registered broker dealer
    affiliated with Canaccord Capital Corporation, and such other US
    registered dealers as may be designated by our Canadian agents.
    Prior to this offering, there has been no public market for our
    securities. <B>There is currently no market through which our
    securities may be sold, and purchasers may not be able to resell
    the securities purchased under this prospectus. </B>We have
    applied for the listing of our common stock on the TSX Venture
    Exchange (TSX-V) under the symbol
    &#147;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#148;.
    Listing of our common stock will be subject to fulfilling all of
    the requirements of the TSX-V. We do not intend to list the
    warrants on any securities exchange.
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 12pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Our business and an investment in our securities involve
    significant risks. These risks are described under the caption
    &#147;Risk Factors&#148; beginning on page&#160;7 of this
    prospectus.</B>
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Neither the Securities and Exchange Commission nor any other
    securities commission or regulatory authority has approved or
    disapproved of these securities or has passed upon the accuracy
    or adequacy of this prospectus. Any representation to the
    contrary is a criminal offense.
</DIV>



<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 01 -->
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="83%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Per Unit(2)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Public offering price(1)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Cdn$
</TD>
<TD nowrap align="right" valign="top">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Cdn$
</TD>
<TD nowrap align="right" valign="top">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Underwriting discounts and commissions(3)(4)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Cdn$
</TD>
<TD nowrap align="right" valign="top">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Cdn$
</TD>
<TD nowrap align="right" valign="top">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Proceeds, before expenses, to Vuzix</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Cdn$
</TD>
<TD nowrap align="right" valign="top">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
    Cdn$
</TD>
<TD nowrap align="right" valign="top">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 11%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=519 length=60 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 06 -->

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 9pt">(1)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 9pt">The offering is denominated in
    Canadian dollars.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 9pt">(2)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 9pt">We intend to allocate
    Cdn$&#160;&#160;&#160;&#160;&#160; to the share of common stock
    and Cdn$&#160;&#160;&#160;&#160;&#160; to the one half of one
    common stock purchase warrant comprising each unit.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 9pt">(3)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 9pt">We have retained the Canadian
    agents to solicit subscriptions for the units on a best efforts
    basis. As consideration for their services in connection with
    the initial public offering, the Canadian agents will receive:
    (i)&#160;a commission, payable in cash, equal to 8% of the gross
    proceeds of the offering; (ii)&#160;options entitling the agents
    to purchase that number of shares of our common stock and
    warrants equal to 12.5% of the aggregate number of shares of our
    common stock and warrants sold under the offering (including the
    shares and warrants issued upon exercise of the over-allotment
    option), at the offering price per share and warrant, for a
    period of 12&#160;months from the closing date; and (iii)&#160;a
    non-refundable due diligence fee of Cdn$15,000. The Canadian
    agents will also be reimbursed for their reasonable fees and
    expenses including the reasonable legal fees and disbursements
    of legal counsel to the agents. The Canadian agents may appoint
    selling agents in the United States, which may be paid cash
    selling commissions not to exceed 6% of the gross proceeds of
    the offering in the United States and options entitling US
    selling agents to purchase that number of shares of our common
    stock and warrants equal to 8% of the aggregate number of shares
    of our common stock and warrants sold in the United States under
    the offering (including the shares and warrants issued upon
    exercise of the over-allotment option) at the initial public
    offering price for a period of 12&#160;months from the closing
    date. The commission paid to US selling agents will be paid by
    the Canadian agents from their commissions. Canaccord Adams
    Inc., a US registered broker dealer affiliated with Canaccord
    Capital Corporation, has been appointed as a selling agent.
    </FONT></TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    <FONT style="font-size: 9pt">(4)
    </FONT></TD>
    <TD></TD>
    <TD valign="bottom">
    <FONT style="font-size: 9pt">In consideration of certain fiscal
    advisory services rendered by the Canadian agents to us pursuant
    to a fiscal advisory fee agreement between us and the Canadian
    agents, we have agreed to issue to the Canadian agents at the
    closing of this offering, in payment of a fiscal advisory fee,
    that number of shares of our common stock equal to, depending on
    the gross proceeds of the offering, between 1.0% and 2.0% of our
    common stock issued and outstanding immediately upon the closing
    of the offering. The issuance of these shares to the Canadian
    agents is not covered by this prospectus. These shares will be
    issued pursuant to exemptions from the registration requirements
    of applicable United States and Canadian securities laws and
    will be subject to resale restrictions under those laws and a
    lock-up agreement for one year. See
    &#147;Underwriting&#160;&#151; Fiscal Advisory Fee
    Agreement.&#148;
    </FONT></TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have granted the agents an over-allotment option, exercisable
    for a period of 30&#160;days from the date of the closing of
    this offering, to sell additional shares of common stock and
    whole warrants up to the lesser of the agents&#146;
    over-allocation position determined as of the time of closing of
    the offering and&#160;&#149;&#160;shares of common stock
    and&#160;&#149;&#160;whole warrants (15% of the number of shares
    and whole warrants offered by us under this prospectus) or any
    combination thereof at a price of Cdn$&#160;&#149;&#160; per
    share and Cdn$&#160;&#149;&#160; per warrant to cover
    over-allotments, if any, and for market stabilization purposes.
    For greater clarity, these warrants will only be issued for the
    purpose of distribution of units to purchasers. The aggregate
    number of shares and whole warrants issuable to purchasers
    pursuant to the offering will not
    exceed&#160;&#149;&#160;and&#160;&#149;&#160;, respectively. If
    the over-allotment option is exercised in full, the total price
    to the public will be Cdn$&#160;&#149;&#160;, the underwriting
    discounts and commissions payable to the agents will be
    Cdn$&#160;&#149;&#160; and the net proceeds to Vuzix will be
    Cdn$&#160;&#149;&#160;. The expenses associated with any
    exercise of the over-allotment option, together with the
    agents&#146; commission, will be paid by us. See
    &#147;Underwriting.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The agents expect to deliver the shares of common stock and
    warrants comprising the units in Toronto, Ontario, Canada on or
    about&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2009.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 18pt">CANACCORD ADAMS INC.</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The date of this prospectus
    is&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2009.
</DIV>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt"><IMG src="o55928o5592801.jpg" alt="(GRAPHIC-OFF)"></DIV>




<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt"><IMG src="o55928o5592802.jpg" alt="(GRAPHIC-IFF)"></DIV>




<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt"><IMG src="o55928o5592803.jpg" alt="(GRAPHIC-IFC)"></DIV>




<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 92%; margin-left: 4%"><!-- BEGIN PAGE WIDTH -->
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">TABLE OF
    CONTENTS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<DIV align="left">
<!-- TOC -->
</DIV>

<DIV align="left">
<A name="tocpage"></A>
</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="97%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Page</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#101'>General Matters</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    ii
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#102'>Use of Market and Industry Data</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    ii
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#103'>Prospectus Summary</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    1
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#104'>Risk Factors</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    7
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#105'>Forward-Looking Statements</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    24
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#106'>Use of Proceeds</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    25
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#107'>Dividend Policy</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    26
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#108'>Capitalization</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    27
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#109'>Dilution</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    29
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#110'>Selected Financial and other Data</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    32
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#111'>Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operations</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    34
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#112'>Business</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    43
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#113'>Management</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    57
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#114'>Executive Compensation</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    61
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#115'>Related Party Transactions</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    73
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#116'>Corporate Governance</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    74
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#117'>Security Ownership of Certain Beneficial Owners
    and Management</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    77
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#118'>Description of Capital Stock</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    78
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#119'>Shares&#160;Eligible for Future Sale</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    84
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#120'>Underwriting</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    87
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#121'>Legal Matters</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    90
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#122'>Experts</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    90
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#123'>Where You Can Find Additional Information</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    90
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#124'>Index to Consolidated Financial Statements</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    F-1
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv3w1.htm">EX-3.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv3w3.htm">EX-3.3</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w1.htm">EX-10.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w2.htm">EX-10.2</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w4.htm">EX-10.4</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w6.htm">EX-10.6</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w7.htm">EX-10.7</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w8.htm">EX-10.8</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w9.htm">EX-10.9</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w10.htm">EX-10.10</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w11.htm">EX-10.11</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w13.htm">EX-10.13</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w14.htm">EX-10.14</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w15.htm">EX-10.15</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w16.htm">EX-10.16</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w17.htm">EX-10.17</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w18.htm">EX-10.18</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv10w20.htm">EX-10.20</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv23w1.htm">EX-23.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="o55928exv23w2.htm">EX-23.2</A></FONT></TD></TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 18%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=84 -->

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>You should rely only on the information contained in this
    prospectus. We have not, and the agents have not, authorized any
    other person to provide you with different information. If
    anyone provides you with different or inconsistent information,
    you should not rely on it. We are not, and the agents are not,
    making an offer to sell these securities in any jurisdiction
    where the offer or sale is not permitted. You should assume that
    the information appearing in this prospectus is accurate only as
    of the date on the front cover of this prospectus. Our business,
    financial condition, results of operations and prospects may
    have changed since that date.</B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<A name='101'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">GENERAL
    MATTERS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All references to Vuzix, the &#147;company,&#148;
    &#147;we,&#148; &#147;us&#148; and &#147;our&#148; are
    references to Vuzix Corporation.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Unless otherwise indicated, all references to
    &#147;dollars,&#148; &#147;US$,&#148; or &#147;$&#148; in this
    prospectus are to United States dollars and all references to
    &#147;Cdn$&#148; are to Canadian dollars. Unless otherwise
    indicated, all Canadian dollar values have been translated to US
    dollars, or vice versa, using a convenience translation of
    US$1.00 = Cdn$&#160;&#149;&#160;. On June&#160;29, 2009, the
    noon buying rate of the Bank of Canada was US$1.00 = Cdn$1.1583.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus contains various company names, product names,
    trade names, trademarks and service marks, all of which are the
    properties of their respective owners.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Unless otherwise indicated or the context otherwise requires,
    all information in this prospectus assumes no exercise of the
    over-allotment option.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Unless otherwise indicated, all references to &#147;GAAP&#148;
    in this prospectus are to United States generally accepted
    accounting principles.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We completed a
    <FONT style="white-space: nowrap">1-for-7</FONT>
    reverse stock split of our common stock in June 2007 and an
    <FONT style="white-space: nowrap">8-for-1</FONT>
    split of our common stock in July 2008. All share numbers and
    amounts per share in this prospectus have been retroactively
    adjusted to give effect to these changes.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Information contained on our websites, including
    <I>www.vuzix.com</I>, shall not be deemed to be part of this
    prospectus or incorporated herein by reference and should not be
    relied upon by prospective investors for the purposes of
    determining whether to purchase the units offered hereunder.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Through and
    including&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2009 (the 40th&#160;day after the date of this prospectus), all
    dealers effecting transactions in units or shares of our common
    stock, whether or not participating in this offering, may be
    required to deliver a prospectus. This is in addition to a
    dealer&#146;s obligation to deliver a prospectus when acting as
    an underwriter with respect to an unsold allotment or
    subscription.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For investors outside the United States, neither we nor any of
    our agents have done anything that would permit this offering or
    possession or distribution of this prospectus in any
    jurisdiction where action for that purpose is required, other
    than in the United States and certain provinces of Canada. You
    are required to inform yourself about and to observe any
    restrictions relating to this offering and the distribution of
    this prospectus.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<A name='102'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">USE OF
    MARKET AND INDUSTRY DATA</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus includes market and industry data that has been
    obtained from third party sources, including industry
    publications, as well as industry data prepared by our
    management on the basis of its knowledge of and experience in
    the industries in which we operate (including our
    management&#146;s estimates and assumptions relating to those
    industries based on that knowledge). Management&#146;s knowledge
    of such industries has been developed through its experience and
    participation in those industries. Although our management
    believes such information to be reliable, neither we nor our
    management have independently verified any of the data from
    third party sources referred to in this prospectus or
    ascertained the underlying economic assumptions relied upon by
    such sources. In addition, the agents have not independently
    verified any of the industry data prepared by management or
    ascertained the underlying estimates and assumptions relied upon
    by management. Furthermore, references in this prospectus to any
    publications, reports, surveys or articles prepared by third
    parties should not be construed as depicting the complete
    findings of the entire publication, report, survey or article.
    The information in any such publication, report survey or
    article is not incorporated by reference in this prospectus.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    ii
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->
<A name='103'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PROSPECTUS
    SUMMARY</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>This summary provides an overview of selected information
    contained elsewhere in this prospectus and does not contain all
    of the information you should consider before investing in our
    securities. You should carefully read the prospectus and the
    registration statement of which this prospectus is a part in
    their entirety before investing in our securities, including the
    information discussed under &#147;Risk Factors&#148; beginning
    on page&#160;7 and our financial statements and notes thereto
    that appear elsewhere in this prospectus.</I>
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">BUSINESS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Company
    Overview</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are engaged in the design, manufacture, marketing and sale of
    devices that are worn like eyeglasses and feature built-in video
    screens that enable the user to view video and digital content,
    such as movies, computer data, the Internet or video games. Our
    products (known commercially as Video Eyewear, but also commonly
    referred to as virtual displays, wearable displays, personal
    viewers, personal displays, head mounted displays, or
    <FONT style="white-space: nowrap">near-to-eye</FONT>
    displays) are used to view high-resolution video and digital
    information primarily from mobile devices (such as cell phones,
    portable media players, gaming systems and laptop computers) and
    from personal computers. Our products provide the user with a
    virtual viewing experience that simulates viewing a large screen
    television or desktop computer monitor practically anywhere,
    anytime.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Video Eyewear products feature high performance miniature
    display modules, low power electronics and related optical
    systems. We produce both monocular and binocular Video Eyewear
    devices that we believe are excellent solutions for many mobile
    computer, mobile internet devices (MID)&#160;or video viewing
    requirements, including general entertainment applications. We
    focus on two markets: the consumer markets for gaming, mobile
    video viewing and stereoscopic three-dimensional video viewing;
    and rugged mobile displays for defense and industrial
    applications. We also offer low-vision assist Video Eyewear
    products that are designed to assist and improve the remaining
    vision of people suffering from macular degeneration.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The development of intellectual property rights relating to our
    technologies is a key aspect of our business strategy. We have
    generated and continue to generate intellectual property as a
    result of our ongoing performance of development contracts and
    our internal research and development activities. We have also
    acquired technologies developed by third parties and we may do
    so in the future.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Industry
    Overview</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Many mobile devices now allow the user to view high-resolution
    full color content. We believe that typical displays currently
    used on mobile devices do not work well for this purpose because
    they are either too small, making it extremely difficult to view
    the detail in their display images with a human eye, or too
    large, making the mobile device cumbersome and difficult to use
    and carry. Some mobile devices employ a touch screen with
    software to magnify or zoom in on a partial image. We believe
    that many consumers consider this solution unsatisfactory
    because it is difficult to navigate and find information on the
    portion of the page being viewed.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In contrast, our Video Eyewear products enable the user to
    effectively view the entire screen on a small, eyeglass-like
    device. Our products employ microdisplays that provide full
    screen resolution but are smaller than one-inch diagonally, with
    some as small as one-quarter of an inch. To make images on the
    microdisplays viewable, our Video Eyewear products incorporate
    proprietary magnifying optics that are usually designed by us.
    The result is a detailed virtual image that appears to the
    viewer to be similar to the image on a full size computer screen
    from a normal desktop working distance or the image on a large
    flat panel television from normal home TV viewing distance. For
    example, when magnified through our optics, a high-resolution
    0.44-inch diagonal microdisplay can provide a viewing experience
    comparable to that on a
    <FONT style="white-space: nowrap">62-inch</FONT>
    diagonal television screen viewed at nine feet. We refer to this
    as a <FONT style="white-space: nowrap">62-inch</FONT>
    virtual display.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that there is growing demand for mobile access to
    high-resolution content in both the consumer and industrial and
    defense markets.
</DIV>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    1
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Products</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We offer products that use our proprietary technology and are
    designed to meet the unique requirements of the consumer,
    industrial and defense markets.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Binocular
    Video Eyewear Products</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each binocular Video Eyewear product contains two microdisplay
    screens, one in front of each eye, mounted in a frame attached
    to eyeglass-style temples with headphones. These products enable
    mobile private viewing of video content on virtual displays that
    can simulate theater-sized screens. They are currently sold on
    the basis of resolution and their effective virtual viewing
    screen size. Our products today range from 320 &#215; 240 pixels
    (Quarter Video Graphics Array or QVGA) to 800 &#215; 600 pixels
    (Super Video Graphics Array or SVGA) resolution and provide
    virtual screen sizes of 44- to
    <FONT style="white-space: nowrap">62-inch</FONT>
    screens viewed at nine feet. We also offer an interactive
    version for PC gaming which includes our proprietary head
    tracking technology, which enables the user to look around the
    environment being displayed in the game by simply moving his or
    her head, and a microphone to enable communication with others.
    Finally, we offer a binocular Video Eyewear product that
    integrates a high-resolution camera with digital magnification,
    designed to assist and improve the remaining vision of persons
    suffering from macular degeneration.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Monocular
    Video Eyewear Products</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our
    Tac-Eye<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    monocular (single eye) Video Eyewear products are designed to
    clip on to a pair of ballistic sunglasses, a head set or
    conventional safety goggles. They can be used with rugged
    laptops, security and night vision cameras and thermal night
    vision sights, including those sights for which we currently
    build the display drive electronics as a
    <FONT style="white-space: nowrap">sub-contractor</FONT>
    to the US Department of Defense.
    Tac-Eye<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    enables users to have wearable, private, hands-free and
    glanceable access to high-resolution content or information
    while retaining most of their real world view.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Defense
    <FONT style="white-space: nowrap">Sub-Assembly</FONT>
    and Custom Solutions</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are involved in several programs as part of contracting teams
    that produce thermal night vision sights to the US Department of
    Defense. We design and manufacture many of the display drive
    electronic subassemblies for light, medium, and heavy weight
    thermal weapon sighting systems for the US and other defense
    forces. When possible, we obtain a first right of refusal to be
    the volume manufacturer of our proprietary display subassemblies
    as part of our contracting process for the custom design of
    products.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Our
    Strategy</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our strategy is to establish and maintain a leadership position
    as a worldwide supplier of Video Eyewear and other virtual
    display technology solutions. We intend to offer our
    technologies across major markets, platforms and applications.
    We will strive to be an innovator in designing virtual display
    devices that enable new mobile video viewing as well as general
    entertainment applications.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To maintain and enhance our position as a leading provider of
    virtual display solutions, we intend to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    improve our brand name recognition;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    develop products for large markets;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    broaden and develop strategic relationships and partnerships;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    expand market awareness for virtual display solutions;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    maintain and exploit any cost advantage our technology can
    provide us;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    extend our proprietary technology leadership;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    establish multiple revenue sources.
</TD>
</TR>

</TABLE>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    2
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Company
    Information</FONT></B>
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We were incorporated under the Delaware General Corporation Law
    in 1997 as VR Acquisition Corp. In 1997 we changed our name to
    Kaotech Corporation. In 1998 we changed our name to Interactive
    Imaging Systems, Inc. In 2004 we changed our name to Vicuity
    Corporation and then to Icuiti Corporation. In September 2007 we
    changed our name to Vuzix Corporation.
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our principal executive offices are located at 75 Town Centre
    Drive, Rochester, New York 14623. Our telephone number is
    <FONT style="white-space: nowrap">(585)&#160;359-5900.</FONT>
    We maintain an Internet website at <I>www.vuzix.com</I>. The
    information contained on, connected to or that can be accessed
    via our website is not part of this prospectus. We have included
    our website address in this prospectus as an inactive textual
    reference only and not as an active hyperlink.
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our wholly-owned direct subsidiary is Vuzix (Europe) Limited,
    which we refer to in this prospectus as Vuzix Europe. Vuzix
    Europe was incorporated on April&#160;10, 2008 pursuant to the
    provisions of the Companies Act (England and Wales). The
    registered and head office of Vuzix Europe is located at St.
    John&#146;s House, 5 South Parade, Summertown, Oxford OX2 7JL.
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    Offering</FONT></B>
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF"><!-- TABLE 06 -->

<TR>
    <TD width="31%"></TD>
    <TD width="1%"></TD>
    <TD width="68%"></TD>
</TR>

<TR>
    <TD valign="top">
    Securities offered by Vuzix </TD>
    <TD></TD>
    <TD valign="bottom">
    Up to&#160;&#149;&#160; units (&#160;&#149;&#160; units if the
    agents&#146; over-allotment option is exercised in full); each
    unit consisting of one share of our common stock, par value
    $0.001 per share, and one half of one common stock purchase
    warrant.</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    Up to&#160;&#149;&#160; shares of our common stock
    (&#160;&#149;&#160;&#160;shares if the agents&#146;
    over-allotment option is exercised in full) (1)</TD>
</TR>


<TR style="line-height: 4pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    Up to&#160;&#149;&#160; common stock purchase warrants
    (&#160;&#149;&#160; common stock purchase warrants if the
    agents&#146; over-allotment option is exercised in full). Each
    whole warrant will entitle its holder to purchase one share of
    our common stock at Cdn$&#160;&#149;&#160; per share at any time
    for&#160;&#149;&#160; months after the closing of this offering.</TD>
</TR>


<TR style="line-height: 2pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Common stock to be outstanding after&#160;this offering </TD>
    <TD></TD>
    <TD valign="top">
    &#160;&#149;&#160;shares (&#160;&#149;&#160;&#160;shares if the
    agents&#146; over-allotment option is exercised in full) (2)</TD>
</TR>


<TR style="line-height: 2pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Over-allotment option </TD>
    <TD></TD>
    <TD valign="bottom">
    We have granted the agents an over-allotment option, exercisable
    for a period of 30&#160;days from the date of the closing of
    this offering, to sell additional shares of common stock and
    whole warrants up to the lesser of the agents&#146;
    over-allocation position determined as of the time of closing of
    the offering and&#160;&#149;&#160; shares of common stock
    and&#160;&#149;&#160; whole warrants (15% of the number of
    shares and warrants offered by us under this prospectus) or any
    combination thereof at a price of Cdn$&#160;&#149;&#160; per
    share and Cdn$&#160;&#149;&#160; per warrant to cover
    over-allotments, if any, and for market stabilization purposes.
    For greater clarity, these warrants will only be issued for the
    purpose of distribution of units to purchasers. The aggregate
    number of shares and warrants issuable to purchasers pursuant to
    the offering will not exceed&#160;&#149;&#160;
    and&#160;&#149;&#160;, respectively. If the over-allotment
    option is exercised in full, the total price to the public will
    be Cdn$&#160;&#149;&#160;, the commission payable to the agents
    will be Cdn$&#160;&#149;&#160; and the net proceeds to us will
    be Cdn$&#160;&#149;&#160;. For additional information see
    &#147;Underwriting.&#148;</TD>
</TR>


<TR style="line-height: 2pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Agent Compensation </TD>
    <TD></TD>
    <TD valign="bottom">
    As consideration for their services, the Canadian agents will
    receive: (i)&#160;a commission equal to 8% of the gross proceeds
    of the offering; (ii)&#160;options entitling the Canadian agents
    to purchase that number of shares of our common stock and
    warrants equal to 12.5% of the aggregate number of shares of our
    common stock and warrants sold under the offering (including the
    shares and warrants issued upon exercise of the over-allotment
    option), at the offering price per share and warrant, for a
    period of 12&#160;months from the closing date; and (iii) a
    non-refundable due diligence fee of Cdn$15,000. The Canadian
    agents will also be reimbursed for their reasonable fees and
    expenses including the reasonable legal fees and disbursements
    of legal </TD>
</TR>

</TABLE>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    3
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="31%"></TD>
    <TD width="1%"></TD>
    <TD width="68%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    counsel to the agents. The Canadian agents may appoint selling
    agents in the United States, including Canaccord Adams Inc.,
    which may be paid cash selling commissions not to exceed 6% of
    the gross proceeds of the offering in the United States and
    options entitling US selling agents to purchase that number of
    shares of our common stock and warrants sold in the United
    States under the offering (including the shares and warrants
    issued upon exercise of the over-allotment option) equal to 8%
    of the aggregate number of shares of our common stock and
    warrants at the initial public offering price for a period of 12
    months from the closing date. The commission paid to US selling
    agents will be paid by the Canadian agents from their
    commissions.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="bottom">
    In consideration of certain fiscal advisory services rendered by
    the Canadian agents to us pursuant to a fiscal advisory fee
    agreement between us and the Canadian agents, we have agreed to
    issue to the Canadian agents at the closing of this offering, in
    payment of a fiscal advisory fee, that number of shares of our
    common stock equal to, depending on the gross proceeds of the
    offering, between 1.0% and 2.0% of our common stock issued and
    outstanding immediately upon the closing of the offering. The
    issuance of these shares to the Canadian agents is not covered
    by this prospectus. These shares will be subject to resale
    restrictions under applicable United States and Canadian
    securities legislation and a contractual lock-up agreement for
    one year. See &#147;Underwriting&#160;&#151; Fiscal Advisory Fee
    Agreement.&#148;</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Use of proceeds </TD>
    <TD></TD>
    <TD valign="bottom">
    Based on an assumed initial public offering price of
    Cdn$&#160;&#149;&#160; per unit, after payment of commissions
    and expenses we expect to receive gross proceeds of
    Cdn$&#160;&#149;&#160; and net proceeds of
    Cdn$&#160;&#149;&#160; (or gross proceeds of
    Cdn$&#160;&#149;&#160; and net proceeds of
    Cdn$&#160;&#149;&#160; if the over-allotment option is exercised
    in full). We expect to use $&#160;&#149;&#160; million of the
    net proceeds of this offering to repay outstanding indebtedness,
    including accrued interest. The indebtedness to be repaid
    includes $95,000 in principal amount plus interest payable to
    our President and Chief Executive Officer. We intend to use the
    remainder of the net proceeds from this offering for research
    and development expenses; capital expenditures; selling,
    marketing, general and administrative expenses; possible
    acquisitions of businesses, technologies or other assets; and
    general corporate purposes. For additional information see
    &#147;Use of Proceeds.&#148;</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    Risk Factors </TD>
    <TD></TD>
    <TD valign="bottom">
    See &#147;Risk Factors&#148; and other information included in
    this prospectus for a discussion of factors you should carefully
    consider before deciding to invest in our securities.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=60 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Consists of (i)&#160;up to&#160;&#149;&#160;&#160;shares
    (&#160;&#149;&#160;&#160;shares if the over-allotment option is
    exercised in full) included in the units; (ii)&#160;up
    to&#160;&#149;&#160;&#160;shares (&#160;&#149;&#160;&#160;shares
    if the over-allotment option is exercised in full) issuable upon
    exercise of the common stock purchase warrants included in the
    units; (iii)&#160;&#149;&#160;&#160;shares issued to the agents
    in payment of a fiscal advisory fee; and (iv)&#160;up
    to&#160;&#149;&#160;&#160;shares (&#160;&#149;&#160;&#160;shares
    if the over-allotment option is exercised in full) and up to an
    additional&#160;&#149;&#160;&#160;shares
    (&#160;&#149;&#160;&#160;shares if the over-allotment option is
    exercised in full) issuable upon exercise of common stock
    purchase warrants issuable upon exercise of the options issued
    to the agents as compensation.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    Does not include (i)&#160;up to 15,304,554&#160;shares issuable
    upon exercise of options granted under our 2007 Amended and
    Restated Stock Option Plan; (ii)&#160;1,200,000&#160;shares
    issuable upon exercise of options granted under our 2009
    Non-Employee Director Stock Option Plan subject to the
    effectiveness of the registration statement of which this
    prospectus forms a part; (iii)&#160;any of the shares described
    in footnote (1)&#160;above except&#160;&#149;&#160; of those
    described in clause&#160;(iii) in footnote (1); (iv)&#160;up to
    7,060,914&#160;shares issuable upon conversion of 168,500
    outstanding shares of our Series&#160;C 6%&#160;Convertible
    Preferred Stock (Series&#160;C Preferred Stock), together with
    all accrued and unpaid dividends thereon as of the date of this
    prospectus, at the rate of $0.2917 per share; (v)&#160;up to
    4,599,045&#160;shares issuable upon conversion of $575,000 in
    aggregate principal amount of convertible promissory notes
    outstanding, together with all accrued and unpaid interest
    thereon as of the date of this prospectus; and (vi)&#160;up to
    7,172,160 shares issuable upon exercise of outstanding warrants.</TD>
</TR>

</TABLE>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    4
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Selected
    Summary Financial Data</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following tables present our summary financial data and
    should be read together with our financial statements and
    accompanying notes and &#147;Management&#146;s Discussion and
    Analysis of Financial Condition and Results of Operations&#148;
    appearing elsewhere in this prospectus. The summary financial
    data for the years ended December&#160;31, 2008, 2007 and 2006
    are derived from our audited annual financial statements, which
    are included elsewhere in this prospectus. The unaudited summary
    financial data as of March&#160;31, 2009 and for the three
    months ended March&#160;31, 2009 and 2008 have been derived from
    our unaudited interim financial statements, which are included
    elsewhere in this prospectus, and include all adjustments,
    consisting of normal recurring adjustments, necessary for a fair
    presentation of our financial position and results of operations
    for these periods.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="45%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Three Months Ended March&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Statement of Operations Data</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Sales</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12,564,487
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10,146,379
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    9,538,308
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,043,994
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,720,914
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Cost of Sales</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,863,508
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,783,473
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,767,550
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,856,683
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,487,349
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Gross Margin</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,700,979
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,362,906
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,770,758
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,187,311
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    233,565
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Operating Expenses</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Research and development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,366,518
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,365,412
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,279,239
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    502,011
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    736,716
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Selling and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,128,625
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,920,164
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,191,800
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    449,266
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    449,562
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    General and administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,299,685
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,718,627
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,560,278
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    478,253
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    533,799
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Depreciation and amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    510,133
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    374,078
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    276,989
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    138,834
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    123,696
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Total operating expenses</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,304,961
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,378,281
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,308,306
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,568,364
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,843,773
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Profit (Loss) from operations</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4,603,982
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,015,375
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (537,548
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (381,053
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,610,208
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Interest and other income (expense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    188
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,549
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    313
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Foreign exchange (loss) gain
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (24,216
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,272
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    366
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Interest expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (260,977
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (241,692
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (179,019
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (65,376
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (41,600
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Legal settlement
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    96,632
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Tax (expense) benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,212
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    98,372
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,700
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (888
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (753
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Total tax and other income (expense)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (290,217
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (44,139
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (182,406
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (67,536
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (41,987
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Net (Loss)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (4,894,199
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (3,059,514
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (719,954
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (448,589
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,652,195
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Income (loss) per share:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Basic and fully diluted*
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0229
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0160
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0047
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0022
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0084
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Weighted average common shares outstanding:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Basic and fully diluted*
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    218,268,927
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    197,973,139
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    173,268,048
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    220,268,927
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    200,424,027
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=60 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD valign="top">
    * </TD>
    <TD></TD>
    <TD valign="bottom">
    All outstanding warrants, options, and convertible debt are
    anti-dilutive, therefore basic and diluted earnings per share
    are the same for all periods.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="44%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Three Months Ended March&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Cash Flow Data</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash flows provided by (used in) operating activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,285,449
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (3,295,900
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    120,053
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (761,919
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (208,047
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash flows (used in) investing activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (549,804
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (316,743
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (479,236
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (60,208
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (164,927
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash flows provided by financing activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,289,116
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,408,328
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    874,569
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    262,559
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    77,652
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    5
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV style="width: 100%; height: 9in; border-top: 1px solid #000000; padding-top: 12pt; border-right: 1px solid #000000; padding-right: 12pt; border-bottom: 1px solid #000000; padding-bottom: 12pt; border-left: 1px solid #000000; padding-left: 12pt"><!-- Begin box 1 -->

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="33%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of March&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Balance Sheet Data</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash and cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    818,719
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    364,856
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    569,171
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    259,151
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    69,534
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Working Capital (deficiency)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,846,289
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    966,658
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    69,766
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,892,747
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (651,720
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total Assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,221,897
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,967,254
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,013,263
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,277,583
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,316,225
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Long-Term Liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,754,379
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,014,476
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,980,476
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,762,408
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,015,453
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accumulated (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (14,687,276
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (9,691,977
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,531,363
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (15,161,140
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (11,369,383
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total Stockholders&#146; equity (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,089,942
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    423,236
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (603,954
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,223,119
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,190,888
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>
</DIV><!-- End box 1 -->

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    6
</DIV><!-- END PAGE WIDTH -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='104'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">RISK
    FACTORS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>An investment in our securities involves a high degree of
    risk. You should carefully consider the risks described below,
    together with all of the other information included in this
    prospectus, before making an investment decision. If any of the
    following risks actually occurs, our business, financial
    condition or results of operations could suffer. In that case,
    the market value of our securities could decline, and you may
    lose all or part of your investment.</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">RISKS
    RELATED TO OUR BUSINESS</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    have a limited operating history in the Video Eyewear products
    industry.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We were formed in 1997 to develop and sell virtual reality and
    other personal display technology and products. Since our
    inception the majority of our sales have been derived from the
    sale of night vision display drive electronics and from research
    and development contracts with suppliers to the US government
    and others. In 2003, we discontinued our original virtual
    reality product line to focus on Video Eyewear products. We
    commenced limited initial sales of our monocular eyewear
    products in fiscal 2003 and commenced shipping our first
    binocular Video Eyewear model in February 2005. Accordingly,
    there is a limited amount of past experience upon which to
    evaluate our business and prospects, and a potential investor
    should consider the challenges, expenses, delays and other
    difficulties involved in the development of our business,
    including the continued development of our technology and the
    achievement of market acceptance for products using our
    technology.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    have incurred net losses since our inception, and we may incur
    net losses in the foreseeable future.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We incurred annual net losses of $4,894,199 in 2008, $3,059,514
    in 2007 and $719,954 in 2006 and net losses of $448,589 and
    $1,652,195 for the three-month periods ended March&#160;31, 2009
    and 2008, respectively. We had an accumulated deficit of
    $15,161,140 as of March&#160;31, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may not achieve or maintain profitability in the future. In
    particular, we expect that our expenses relating to sales and
    marketing and product development and support, as well as our
    general and administrative costs, will increase, requiring us to
    increase sales in order to achieve and maintain profitability.
    If we do not achieve and maintain profitability, our financial
    condition will be materially and adversely affected. We would
    eventually be unable to continue our operations unless we were
    able to raise additional capital. We may not be able to raise
    any necessary capital on commercially reasonable terms or at
    all. If we fail to achieve or maintain profitability on a
    quarterly or annual basis within the timeframe expected by
    investors, the market price of our common stock may decline.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    have historically depended on defense related engineering
    contracts and two customers for sales.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Since inception, the majority of our sales have been derived
    from the sale of night vision display drive electronics to two
    suppliers to the US government. Sales of night vision display
    drive electronics to these customers amounted to 20%, 17% and
    42% of our sales in 2008, 2007 and 2006, respectively, and 45%
    and 47% for the three-month periods ended March&#160;31, 2009
    and 2008, respectively. We have no long-term contracts with
    these customers. A significant reduction or delay in orders from
    either of our significant customers would materially reduce our
    revenue and cash flow and adversely affect our ability to
    achieve or maintain profitability in the future.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The next largest source of revenues has been sales directly to
    the US Department of Defense, primarily for engineering
    programs. Such sales amounted to 12%, 54% and 27% of our sales
    in 2008, 2007 and 2006, respectively, and 9% and 0% for the
    three-month periods ended March&#160;31, 2009 and 2008,
    respectively. We have no long-term contracts with the US
    government for engineering services. We plan to submit proposals
    for additional development contract funding. However,
    development contract funding is subject to legislative
    authorization and, even if funds are appropriated, such funds
    may be withdrawn based on changes in government priorities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Together, these two groups of customers accounted for 32%, 71%
    and 69% of our sales in 2008, 2007 and 2006, respectively, and
    for 54% and 47% of our sales in the three-month periods ended
    March&#160;31, 2009 and 2008. We may not be successful in
    obtaining new government contracts or in receiving further night
    vision display electronics orders. Our inability to obtain sales
    from government contracts could have a material adverse effect
    on
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    7
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    our results of operations and would likely cause us to delay or
    slow our growth plans, resulting in lower net sales and
    adversely affect our liquidity and profitability.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our US
    government defense contracts and subcontracts are subject to
    procurement laws and regulations.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Generally, US government contracts are subject to procurement
    laws and regulations. Some of the our contracts are governed by
    the Federal Acquisition Regulation (FAR), which lays out uniform
    policies and procedures for acquiring goods and services by the
    US government, and agency-specific acquisition regulations that
    implement or supplement the FAR. For example, the Department of
    Defense implements the FAR through the Defense Federal
    Acquisition Regulations (DFAR).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The FAR also contains guidelines and regulations for managing a
    contract after award, including conditions under which contracts
    may be terminated, in whole or in part, at the government&#146;s
    convenience or for default. If a contract is terminated for the
    convenience of the government, a contractor is entitled to
    receive payments for its allowable costs and, in general, the
    proportionate share of fees or earnings for the work done. If a
    contract is terminated for default, the government generally
    pays for only the work it has accepted. These regulations also
    subject us to financial audits and other reviews by the
    government of our costs, performance, accounting and general
    business practices relating to our government contracts, which
    may result in adjustment of our contract-related costs and fees.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our US government contract and subcontract orders are funded by
    government budgets that are proposed by the President of the
    United States and reviewed and approved by the Congress. Funds
    allocated to government agencies are administered by the
    Executive Office of the President. There are two primary risks
    associated with this process. First, the process may be delayed
    or disrupted because of congressional schedules, negotiations
    over funding levels for programs or unforeseen national or world
    events. Second, funding for multi-year contracts can be changed
    in future appropriations. Either of these events could affect
    the allocation, timing, schedule and program content of our
    government contracts and subcontracts.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    lack of long-term purchase orders and commitments could lead to
    a rapid decline in our sales and profitability.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All of our significant consumer division customers issue
    purchase orders solely in their own discretion, often only two
    to four weeks before the requested date of shipment. Our
    customers are generally able to cancel orders (without penalty)
    or delay the delivery of products on relatively short notice. In
    addition, our customers may decide not to purchase products from
    us for any reason. Any of our current customers may stop
    purchasing our products in the future. If those customers do not
    continue to purchase our products, our sales volume and
    profitability could decline rapidly with little or no warning
    whatsoever.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We cannot rely on long-term purchase orders or commitments to
    protect us from the negative financial effects of a decline in
    demand for our products. The limited certainty of product orders
    can make it difficult for us to forecast our sales and allocate
    our resources in a manner consistent with our actual sales.
    Moreover, our expense levels are based in part on our
    expectations of future sales and, if our expectations regarding
    future sales are inaccurate, we may be unable to reduce costs in
    a timely manner to adjust for sales shortfalls. Furthermore,
    because we depend on a small number of customers for the vast
    majority of our sales, the ramifications of these risks is
    greater than if we had a greater number of customers. As a
    result of our lack of long-term purchase orders and purchase
    commitments, we may experience a rapid decline in our sales and
    profitability.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Historically,
    a substantial portion of our assets has been comprised of
    accounts receivable representing amounts owed by a small number
    of customers. If any of these customers fails to pay us amounts
    owed in a timely manner, we could suffer a significant decline
    in cash flow and liquidity which, in turn, could cause us to be
    unable pay our liabilities and purchase adequate inventory to
    sustain or expand our sales volume.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our accounts receivable represented approximately 30%, 53% and
    53% of our total current assets as of December&#160;31, 2008,
    2007 and 2006, respectively, and 25% and 23% for the three-month
    periods ended March&#160;31, 2009 and 2008, respectively. As of
    March&#160;31, 2009, 46% of our accounts receivable represented
    amounts owed by
</DIV>

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    <BR>
    8
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    two customers, each of which represented over 20% of the total
    amount of our accounts receivable. As a result of the
    substantial amount and concentration of our accounts receivable,
    if any of our major customers fails to pay us amounts owed in a
    timely manner, we could suffer a significant decline in cash
    flow and liquidity which could adversely affect our ability to
    pay our liabilities and to purchase inventory to sustain or
    expand our current sales volume and adversely affect our ability
    to continue our business.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, our business is characterized by long periods for
    collection from our customers and short periods for payment to
    our suppliers, the combination of which may cause us to have
    liquidity problems. We experience an average accounts settlement
    period ranging from one month to as high as three months from
    the time we deliver our products to the time we receive payment
    from our customers. In contrast, we typically need to place
    certain deposits and advances with our suppliers on a portion of
    the purchase price. Because our payment cycle is considerably
    shorter than our receivable collection cycle, we may experience
    working capital shortages. Working capital management, including
    prompt and diligent billing and collection, is an important
    factor in our results of operations and liquidity. System
    problems, industry trends, our customers&#146; liquidity
    problems or payment practices or other issues may extend our
    collection period, which would adversely impact our liquidity,
    our ability to pay our liabilities and to purchase inventory to
    sustain or expand our current sales volume, and adversely affect
    our ability to continue our business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    future growth and profitability could be adversely affected if
    our marketing initiatives are not effective in generating
    sufficient levels of brand awareness.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Since inception, the majority of our sales have been derived
    from the sale of night vision display electronics and from
    research and development contracts with suppliers to, or
    directly to the US government and other customers. Our long-term
    business plan contemplates that we will transition our business
    so that the majority of our sales are earned from consumer
    products sales. In connection with this transition, we are
    engaged in a variety of marketing initiatives intended to
    promote sales of our consumer products. Our future growth and
    profitability from our consumer products will depend in large
    part upon the effectiveness and efficiency of these marketing
    efforts, including our ability to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    create awareness of our brand and products, including general
    awareness of this new Video Eyewear product category;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    identify the most effective and efficient levels of spending for
    marketing expenditures in our new target market;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    effectively manage marketing costs (including creative and
    media) in order to maintain acceptable operating margins and
    return on marketing investment;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    select the right markets in which to market;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    convert consumer awareness into actual product purchases.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our planned marketing expenditures may not result in increased
    total sales or generate sufficient levels of product and brand
    name awareness. We may not be able to manage our marketing
    expenditures on a cost-effective basis.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    current decline and any future decline in general economic
    conditions could lead to reduced consumer demand for our
    products and otherwise have an adverse effect on our liquidity
    and profitability.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that purchases of our consumer Video Eyewear products
    are dependent upon levels of discretionary spending by our
    customers. This means that our financial performance will be
    sensitive to changes in overall economic conditions that affect
    consumer spending. Consumer spending habits are affected by,
    among other things, prevailing economic conditions, levels of
    employment, salaries and wage rates, consumer confidence and
    consumer perception of economic conditions. As widely reported,
    general worldwide economic conditions have experienced a
    downturn due to, among other things, slower economic activity,
    concerns about inflation, decreased consumer confidence, reduced
    corporate profits and capital spending, and adverse business
    conditions. This can impact us
</DIV>

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    <BR>
    9
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    through reduced sales, elongated selling cycles, delays in
    product implementation and increased competitive margin
    pressure. We are unable to accurately predict the likely
    duration and severity of the current disruption in financial
    markets and adverse economic conditions in the United States and
    other countries. The continuation of this downturn, the further
    deterioration of economic conditions in the United States or key
    international economies or uncertainty as to the economic
    outlook could reduce discretionary spending or cause a shift in
    consumer discretionary spending to other products. Any of these
    factors would likely cause us to delay or slow our growth plans,
    result in lower net sales and adversely affect our liquidity and
    profitability. Similarly, the tightening of credit markets may
    adversely affect our supplier base and increase the potential
    for one or more of our suppliers to experience financial
    distress or bankruptcy, which could materially and adversely
    affect our business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    consumer Video Eyewear sales are seasonal and our sales during
    the winter holiday season will greatly affect our operating
    results.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Historically, a high percentage of our consumer Video Eyewear
    product annual sales have been attributable to the winter
    holiday selling season. Like many manufacturers of consumer
    electronics products, we must make merchandising and inventory
    decisions for the winter holiday selling season well in advance
    of actual sales. Further compounding this forecasting are other
    fluctuations in demand for the consumer electronics products
    that work with our Video Eyewear products, often due to the same
    seasonal influences, as well as technological advances and new
    models which are often introduced later in the calendar year.
    Inaccurate projections of demand or deviations in the demand for
    our product can cause large fluctuations in both our fourth
    quarter results and could have a material adverse effect on our
    results of operations for the entire fiscal year. We expect that
    our fourth quarter sales of consumer products will remain
    dependent on our performance during the winter holiday selling
    season.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    Video Eyewear products require ongoing research and
    development.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our research and development efforts remain subject to all of
    the risks associated with the development of new products based
    on emerging and innovative technologies, including, for example,
    unexpected technical problems or the possible insufficiency of
    funds for completing development of these products. If we
    experience technical problems or delays, further improvements in
    our products and the introduction of future products could be
    delayed, and we could incur significant additional expenses and
    our business may fail.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We anticipate that we will require additional funds and further
    US government engineering services contracts to maintain our
    current levels of expenditure for research and development of
    new products and technologies, and to obtain and maintain
    patents and other intellectual property rights in these
    technologies, the timing and amount of which are difficult to
    forecast. Our cash on hand after the successful completion of
    this offering coupled with the possibility of further negative
    cash flow from operations may not be sufficient to meet all of
    our future needs. We have no commitment for additional funds.
    Any funds we need may not be available on commercially
    reasonable terms or at all. If we cannot obtain any necessary
    additional capital when needed, we might be forced to reduce our
    research and development efforts which would materially and
    adversely affect our business. If we attempt to raise capital in
    an offering of shares of our common stock, preferred stock,
    convertible securities or warrants, or if we engage in
    acquisitions involving the issuance of such securities, our
    then-existing stockholders&#146; interests will be diluted.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    planned future products are dependent on advances in technology
    by other companies.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We rely on and will continue to rely on technologies (including
    microdisplays) that are developed and produced by other
    companies. The commercial success of certain of our planned
    future products will depend in part on advances in these and
    other technologies by other companies. We may, from time to
    time, contract with and support companies developing key
    technologies in order to accelerate the development of them for
    our specific uses. Such activities might not result in useful
    technologies or components for us.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    business depends on our development of new products and
    technologies.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The market for our products is characterized by rapid changes in
    products, designs and manufacturing process technologies. Our
    success depends to a large extent on our ability to develop and
    manufacture new products and
</DIV>

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    <BR>
    10
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    technologies to match the varying requirements of different
    customers and groups in order to establish a competitive
    position and become profitable. Furthermore, we must adapt our
    products and processes to technological changes and emerging
    industry standards and practices on a cost-effective and timely
    basis. Our failure to accomplish any of the above could harm our
    business and operating results.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Consumer electronics products are subject to rapid technological
    changes. Companies within the consumer electronics industry are
    continuously developing new products with increased performance
    and functionality. This puts pricing pressure on existing
    products and constantly threatens to make them, or causes them
    to be, obsolete. Our typical product&#146;s life cycle is
    relatively short, generating lower average selling prices as the
    cycle matures. If we fail to accurately anticipate the
    introduction of new technologies, we may possess significant
    amounts of obsolete inventory that can only be sold at
    substantially lower prices and gross margins than we
    anticipated. In addition, if we fail to accurately anticipate
    the introduction of new technologies, we may be unable to
    compete effectively due to our failure to offer products most
    demanded by the marketplace. If any of these failures occur, our
    sales, profit margins and profitability will be adversely
    affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Microdisplay-based
    personal displays compete with other technologies in the market
    for mobile displays.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The mobile display market is dominated by displays larger than
    one-inch, based on direct view liquid crystal display
    (LCD)&#160;and organic light emitting display (OLED) technology.
    A number of companies have made and continue to make substantial
    investments in, and are conducting research to improve
    characteristics of, small direct view LCDs. Many of the leading
    manufacturers of these larger direct view LCDs, including LG
    Electronics, Royal Philips Electronics, Samsung Electronics Co.,
    Ltd., Sony Corporation and Sharp Corporation, are large,
    established companies with global marketing capabilities,
    widespread brand recognition and extensive financial resources.
    Advances in LCD and OLED technology or other technologies may
    overcome their current limitations and permit them to remain or
    become more attractive technologies for personal viewing
    applications, which could limit the potential market for our
    Video Eyewear technology and cause our business strategy to fail.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    It is difficult to assess or predict with any certainty the
    potential size, timing and viability of market opportunities for
    our microdisplay-based Video Eyewear products or their market
    acceptance. Market acceptance of Video Eyewear technology will
    depend, in part, upon consumer acceptance of
    <FONT style="white-space: nowrap">near-to-eye</FONT>
    displays and upon microdisplay technology providing benefits
    comparable to or greater than those provided by alternative
    direct view display technology at a competitive price. If
    consumers fail to accept
    <FONT style="white-space: nowrap">near-to-eye</FONT>
    displays in the numbers we anticipate or as soon as we
    anticipate, the sales of our Video Eyewear products and our
    results of operations would be adversely affected and our
    business strategy may fail.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Other
    microdisplay-based personal display technology may be more
    successful than ours.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition to competing with direct view displays, we also
    compete with microdisplay-based personal display technologies
    that have been developed by other companies. Our primary
    personal display competitors include DaeYang Co., Ltd., Ilixco
    Inc., MyVu Corporation (MyVu), Carl Zeiss, Inc. (Zeiss), 5DT
    Inc., eMagin Corporation (eMagin), Kopin Corporation (Kopin),
    Lumus Ltd. (Lumus) and Kaiser Electro Optics Inc. (Kaiser).
    Additionally, at recent technology exhibitions Sony and Brother
    International Corporation have demonstrated personal display
    glasses that look like sunglasses. Most of our
    microdisplay-based competitors have greater financial,
    marketing, distribution and technical resources than we do.
    Certain of these competing microdisplay-based technologies
    entered the marketplace prior to us. Moreover, our competitors
    may succeed in developing new microdisplay-based personal
    display technologies that are more affordable or have more or
    more desirable features than our technology. If our products are
    unable to capture a substantial portion of the personal display
    market, our business strategy may fail.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    business and products are subject to government regulation in
    the US and in Europe.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our products must comply with certain requirements of the US
    Federal Communications Commission (FCC) regulating
    electromagnetic radiation in order to be sold in the US and with
    comparable requirements of the regulatory authorities of the
    European Union (EU) and other jurisdictions in order to be sold
    in those jurisdictions. We are also subject to various
    governmental regulations related to toxic, volatile, and other
    hazardous chemicals
</DIV>

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    <BR>
    11
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    used in connection with parts of our manufacturing process,
    including the Restriction of Certain Hazardous Substances
    Directive (RoHS) issued by the EU effective July&#160;1, 2006.
    This directive restricts the distribution of products within the
    EU that exceed very low maximum concentration values of certain
    substances, including lead.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that all our current consumer products comply with
    the regulations of the jurisdictions in which they are sold. Our
    failure to comply with these regulations in the future could
    result in the imposition of fines or in the suspension or
    cessation of our operations in the applicable jurisdictions.
    Additional regulations applicable to our business may be enacted
    in the United States or other jurisdictions in the future.
    Compliance with regulations enacted in the future could
    substantially increase our cost of doing business or otherwise
    have a material adverse effect on our results of operations and
    our business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    products will likely experience rapidly declining unit
    prices.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the markets in which we expect to compete, prices of
    established products tend to decline significantly over time. In
    order to maintain our profit margins over the long term, we
    believe that we will need to continuously develop product
    enhancements and new technologies that will either slow price
    declines of our products or reduce the cost of producing and
    delivering our products. While we anticipate many opportunities
    to reduce production costs over time, we may not be able to
    reduce our production costs. We expect to attempt to offset the
    anticipated decrease in our average selling price by introducing
    new products, increasing our sales volumes or adjusting our
    product mix. If we fail to do so, our results of operations will
    be materially and adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">If we
    cannot obtain and maintain appropriate patent and other
    intellectual property rights protection for our technology, our
    business will suffer.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The value of our personal display and related technologies is
    dependent on our ability to secure and maintain appropriate
    patent and other intellectual property rights protection. We
    intend to continue to aggressively pursue additional patent
    protection for our new products and technology. Although we own
    many patents covering our technology that have already been
    issued, we may not be able to obtain additional patents that we
    apply for, or that any of these patents, once issued, will give
    us commercially significant protection for our technology, or
    will be found valid if challenged. Moreover, we have not
    obtained patent protection for some of our technology in all
    foreign countries in which our products might be manufactured or
    sold. In any event, the patent laws and enforcement regimes of
    other countries may differ from those of the United States as to
    the patentability of our personal display and related
    technologies and the degree of protection afforded.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any patent or trademark owned by us may be challenged and
    invalidated or circumvented. Patents may not issue from any of
    our pending or future patent applications. Any claims and issued
    patents or pending patent applications may not be broad or
    strong enough and may not be issued in all countries where our
    products can be sold or our technologies can be licensed to
    provide meaningful protection against any commercial damage to
    us. Further, others may develop technologies that are similar or
    superior to our technologies, duplicate our technologies or
    design around the patents owned by us. Effective intellectual
    property protection may be unavailable or limited in certain
    foreign countries. Despite our efforts to protect our
    proprietary rights, unauthorized parties may attempt to copy or
    otherwise use aspects of our processes and devices that we
    regard as proprietary. Policing unauthorized use of our
    proprietary information and technology is difficult and our
    efforts to do so may not prevent misappropriation of our
    technologies. In the event that our intellectual property
    protection is insufficient to protect our intellectual property
    rights, we could face increased competition in the market for
    our products and technologies, which could have a material
    adverse effect on our business, financial condition and results
    of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may become engaged in litigation to protect or enforce our
    patent and other intellectual property rights or in
    International Trade Commission proceedings to abate the
    importation of goods that would compete unfairly with our
    products. In addition, we may have to participate in
    interference or reexamination proceedings before the
    US&#160;Patent and Trademark Office, or in opposition,
    nullification or other proceedings before foreign patent
    offices, with respect to our patents or patent applications. All
    of these actions would place our patents and other intellectual
    property rights at risk and may result in substantial costs to
    us as well as a diversion of management attention. Moreover, if
    successful, these actions could result in the loss of patent or
    other intellectual property rights protection for the key
    technologies on which our business strategy depends.
</DIV>

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    <BR>
    12
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, we rely in part on unpatented proprietary
    technology, and others may independently develop the same or
    similar technology or otherwise obtain access to our unpatented
    technology. To protect our trade secrets, know-how and other
    proprietary information, we require employees, consultants,
    financial advisors and strategic partners to enter into
    confidentiality agreements. These agreements may not provide
    meaningful protection for our trade secrets, know-how or other
    proprietary information in the event of any unauthorized use,
    misappropriation or disclosure of those trade secrets, know-how
    or other proprietary information. In particular, we may not be
    able to fully or adequately protect our proprietary information
    as we conduct discussions with potential strategic partners. If
    we are unable to protect the proprietary nature of our
    technology, it will harm our business.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Despite our efforts to protect our intellectual property rights,
    intellectual property laws afford us only limited protection. A
    third party could copy or otherwise obtain information from us
    without authorization. Accordingly, we may not be able to
    prevent misappropriation of our intellectual property or to
    deter others from developing similar products or services.
    Further, monitoring the unauthorized use of our intellectual
    property is difficult. Litigation may be necessary to enforce
    our intellectual property rights or to determine the validity
    and scope of the proprietary rights of others. Litigation of
    this type could result in substantial costs and diversion of
    resources, may result in counterclaims or other claims against
    us and could significantly harm our results of operations. In
    addition, the laws of some foreign countries do not protect our
    proprietary rights to the same extent as do the laws of the
    United States.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As is commonplace in technology companies, we employ individuals
    who were previously employed at other technology companies. To
    the extent our employees are involved in research areas that are
    similar to those areas in which they were involved at their
    former employers, we may be subject to claims that such
    employees or we have, inadvertently or otherwise, used or
    disclosed the alleged trade secrets or other proprietary
    information of the former employers. Litigation may be necessary
    to defend against such claims. Litigation of this type could
    result in substantial costs to us and divert our resources.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also depend on trade secret protection through
    confidentiality and license agreements with our employees,
    subsidiaries, licensees, licensors and others. We may not have
    agreements containing adequate protective provisions in every
    case, and the contractual provisions that are in place may not
    provide us with adequate protection in all circumstances. The
    unauthorized reproduction or other misappropriation of our
    intellectual property could diminish the value of our brand,
    competitive advantages or goodwill and result in decreased sales.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We may
    incur substantial costs or lose important rights as a result of
    litigation or other proceedings relating to our products,
    patents and other intellectual property rights.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In recent years, there has been significant litigation involving
    patents and other intellectual property rights in many
    technology-related industries. Until recently, patent
    applications were retained in secrecy by the US Patent and
    Trademark Office until and unless a patent was issued. As a
    result, there may be US patent applications pending of which we
    are unaware that may be infringed by the use of our technology
    or a part thereof, thus substantially interfering with the
    future conduct of our business. In addition, there may be issued
    patents in the United States or other countries that are
    pertinent to our business of which we are not aware. We and our
    customers could be sued by other parties for patent infringement
    in the future. Such lawsuits could subject us and them to
    liability for damages or require us to obtain additional
    licenses that could increase the cost of our products, which
    might have an adverse affect on our sales.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, in the future we may assert our intellectual
    property rights by instituting legal proceedings against others.
    We may not be able to successfully enforce our patents in any
    lawsuits we may commence. Defendants in any litigation we may
    commence to enforce our patents may attempt to establish that
    our patents are invalid or are unenforceable. Any patent
    litigation could lead to a determination that one or more of our
    patents are invalid or unenforceable. If a third party succeeds
    in invalidating one or more of our patents, that party and
    others could compete more effectively against us. Our ability to
    derive sales from products or technologies covered by these
    patents could be adversely affected.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Whether we are defending the assertion of third party
    intellectual property rights against our business as a result of
    the use of our technology, or we are asserting our own
    intellectual property rights against others, such litigation can
    be complex, costly, protracted and highly disruptive to our
    business operations by diverting the
</DIV>

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    <BR>
    13
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    attention and energies of management and key technical
    personnel. As a result, the pendency or adverse outcome of any
    intellectual property litigation to which we are subject could
    disrupt business operations, require the incurrence of
    substantial costs and subject us to significant liabilities,
    each of which could severely harm our business.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Plaintiffs in intellectual property cases often seek injunctive
    relief. Any intellectual property litigation commenced against
    us could force us to take actions that could be harmful to our
    business and thus to our sales, including the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    discontinuing selling the products that incorporate or otherwise
    use technology that contains our allegedly infringing
    intellectual property;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    attempting to obtain a license to the relevant third party
    intellectual property, which may not be available on reasonable
    terms or at all;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
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    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    attempting to redesign our products to remove our allegedly
    infringing intellectual property.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we are forced to take any of the foregoing actions, we may be
    unable to manufacture and sell products that incorporate our
    technology at a profit or at all. Furthermore, the measure of
    damages in intellectual property litigation can be complex, and
    is often subjective or uncertain. If we were to be found liable
    for infringement of proprietary rights of a third party, the
    amount of damages we might have to pay could be substantial and
    is difficult to predict. Decreased sales of our products
    incorporating our technology would adversely affect our sales.
    Any necessity to procure rights to the third party technology
    might cause us to negotiate the royalty terms of the third party
    license which could increase our cost of production or, in
    certain cases, terminate our ability to build some of our
    products entirely.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    failure to renew, register or otherwise protect our trademarks
    could have a negative impact on the value of our brand names and
    our ability to use those names in certain geographical
    areas.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe our copyrights and trademarks are critical to our
    success. We rely on trademark, copyright and other intellectual
    property laws to protect our proprietary rights. If we fail to
    properly register and otherwise protect our trademarks, service
    marks and copyrights, we may lose our rights, or our exclusive
    rights, to them. In that case, our ability to effectively market
    and sell our products and services could suffer, which could
    harm our business.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">There
    may be negative effects on eyesight from the long-term use of
    our products.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The personal display products that we currently market or may
    introduce and market in the future are new and utilize new
    technology. While virtual display technology has been in use
    over the past 25&#160;years, sales to the general public have
    been limited. Extensive and continual viewing of any display,
    including standard computer monitors, for hours each day has the
    potential to negatively affect eyesight. Accordingly, it is
    possible that prolonged use of our products may adversely affect
    a user&#146;s eyesight. We design our products with these
    considerations in mind to attempt to minimize any potential
    negative impact. We warn users that extensive daily use without
    appropriate rest periods may cause eye fatigue that could result
    in temporary or permanent damage (in much the same way that a
    computer monitor manufacturers now warn users about long-term
    computer use). Despite our efforts, we may be unable to overcome
    this risk and such risk could result in claims against us by
    users of our products. Any such claims, whether or not we are
    ultimately held liable for them, could diminish the value of our
    brand, competitive advantages or goodwill and may result in
    decreased sales and we could incur significant expense in
    defending against any such claims. In addition, if we are
    ultimately held liable for any such claims, the resulting
    liabilities may have a material adverse effect on our business,
    financial condition and results of operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    business and products may expose us to product liability
    claims.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our business may expose us to product liability claims. Although
    no such claims have been brought against us to date, and to our
    knowledge no such claim is threatened or likely, we may face
    liability to product users for damages resulting from the design
    or manufacture of our products. Any such claims, whether or not
    we are ultimately held liable for them, could diminish the value
    of our brand, competitive advantages or goodwill and result in
    decreased sales and we could incur significant expense in
    defending against any such claims. While we plan to obtain and
    maintain product liability insurance coverage, product liability
    claims made against us may exceed
</DIV>

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    <BR>
    14
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    coverage limits or fall outside the scope of such coverage.
    Also, insurance may not be available at commercially reasonable
    rates or at all. We do not have any such product liability
    insurance in effect.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We are
    exposed to currency fluctuations, which may have an adverse
    effect on us.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A substantial majority of our sales and cost of components are
    denominated in US dollars. As our business grows both our sales
    and production costs may increasingly be denominated in other
    currencies. Where such sales or production costs are denominated
    in other currencies, they are converted to US dollars for the
    purpose of calculating any sales or costs to us. Our sales may
    decrease as a result of any appreciation of the US dollar
    against these other currencies. The proceeds of this offering
    will be denominated in Canadian dollars and any substantial
    appreciation of the US dollar against the Canadian dollar during
    this offering may materially adversely affect our liquidity and
    capital resources.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The majority of our current expenditures are incurred in US
    dollars and many of our components come from countries that
    currently peg their currency against the US dollar. If the US
    dollar depreciates versus these foreign currencies, additional
    US dollars will be required to fund our purchases of these
    components.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Although we do not currently enter into currency option
    contracts or engage in other hedging activities, we may do so in
    the future. We can not assure you that we will undertake any
    such hedging activities or that, if we do so, they will be
    successful in reducing the risks to us of our exposure to
    foreign currency fluctuations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Due to
    our significant level of international operations, we are
    subject to international operational, financial, legal and
    political risks.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A substantial part of our operations are expected to be outside
    of the United States and many of our customers and suppliers
    have some or all of their operations in countries other than the
    United States. Risks associated with our doing business outside
    of the United States include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

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<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    compliance with a wide variety of foreign laws and regulations,
    particularly labor, environmental and other laws and regulations
    that govern our operations in those countries;
</TD>
</TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    legal uncertainties regarding taxes, tariffs, quotas, export
    controls, export licenses and other trade barriers;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    economic instability in the countries of our suppliers and
    customers, particularly in the Asia-Pacific region, causing
    delays or reductions in orders for their products and therefore
    our sales;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


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</TD>
    <TD align="left">
    political instability in the countries in which our suppliers
    operate, particularly in China and Taiwan;
</TD>
</TR>


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    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    difficulties in collecting accounts receivable and longer
    accounts receivable payment cycles;&#160;and
</TD>
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    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    potentially adverse tax consequences.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any of these factors could harm our own, our suppliers&#146; and
    our customers&#146; international operations and businesses and
    impair our and their ability to continue expanding into
    international markets.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    success depends on attracting and retaining highly skilled and
    qualified technical and consulting personnel.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Changes in our management could have an adverse effect on our
    business. This is especially an issue while our staff is small.
    We are dependent upon the active participation of several key
    management personnel, including Paul&#160;J.&#160;Travers, our
    President and Chief Executive Officer (CEO). We do not carry key
    person life insurance on any of our senior management or other
    key personnel other than our CEO. While we have some life
    insurance coverage on our CEO, we do not believe it would be
    sufficient to completely protect us against losses we may suffer
    if his services were to become unavailable to us in the future.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We must hire highly skilled technical personnel as employees and
    as independent contractors in order to develop our products. As
    of the date of this prospectus we had 48&#160;full-time
    employees. The competition for highly skilled technical,
    managerial and other personnel is intense and we may not be able
    to retain or recruit such personnel. Our recruiting and
    retention success is substantially dependent on our ability to
    offer competitive salaries
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    15
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    and benefits to our employees. We must compete with companies
    that possess greater financial and other resources than we do
    and that may be more attractive to potential employees and
    contractors. To be competitive, we may have to increase the
    compensation, bonuses, stock options and other fringe benefits
    offered to employees in order to attract and retain such
    personnel. The costs of retaining or attracting new personnel
    may have a material adverse effect on our business and operating
    results. If we fail to attract and retain the technical and
    managerial personnel we need to be successful, our business,
    operating results and financial condition could be materially
    adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    failure to effectively manage growth could harm our
    business.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have rapidly and significantly expanded the number and types
    of products we sell, and we will endeavor to further expand our
    product portfolio. We must regularly introduce new products and
    technologies, enhance existing products, and effectively
    stimulate customer demand for new products and upgraded versions
    of our existing products.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This expansion of our products places a significant strain on
    our management, operations and engineering resources.
    Specifically, the areas that are strained most by our growth
    include the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>New Product Launch:</I>&#160;&#160;With the growth of our
    product portfolio, we experience increased complexity in
    coordinating product development, manufacturing, and shipping.
    As this complexity increases, it places a strain on our ability
    to accurately coordinate the commercial launch of our products
    with adequate supply to meet anticipated customer demand and
    effective marketing to stimulate demand and market acceptance.
    If we are unable to scale and improve our product launch
    coordination, we could frustrate our customers and lose retail
    shelf space and product sales;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Forecasting, Planning and Supply Chain
    Logistics:</I>&#160;&#160;With the growth of our product
    portfolio, we also experience increased complexity in
    forecasting customer demand, in planning for production, and in
    transportation and logistics management. If we are unable to
    scale and improve our forecasting, planning and logistics
    management, we could frustrate our customers, lose product sales
    or accumulate excess inventory;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    <I>Support Processes:</I>&#160;&#160;To manage the growth of our
    operations, we will need to continue to improve our transaction
    processing, operational and financial systems, and procedures
    and controls to effectively manage the increased complexity. If
    we are unable to scale and improve these areas, the consequences
    could include: delays in shipment of product, degradation in
    levels of customer support, lost sales, decreased cash flows,
    and increased inventory. These difficulties could harm or limit
    our ability to expand.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    facilities and information systems and those of our key
    suppliers could be damaged as a result of disasters or
    unpredictable events, which could have an adverse effect on our
    business operations.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We operate the vast majority of our business from three
    locations in the Rochester, New York area. We also rely on third
    party manufacturing plants in China and third party logistics,
    sales and marketing facilities in other parts of the world to
    provide key components of our Video Eyewear products and
    services necessary for our operations. If major disasters such
    as earthquakes, fires, floods, wars, terrorist attacks, computer
    viruses, transportation disasters or other events occur in any
    of these locations, or our information system or communications
    network or those of any of our key component suppliers breaks
    down or operates improperly as a result of such events, our
    facilities or those of our key suppliers may be seriously
    damaged, and we may have to stop or delay production and
    shipment of our products. We may also incur expenses relating to
    such damages. If production or shipment of our products or
    components is stopped or delayed or if we incur any increased
    expenses as a result of damage to our facilities, our business,
    operating results and financial condition could be materially
    adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    generally do not have long-term contracts with our
    customers.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our business is operated on the basis of short-term purchase
    orders and engineering contracts that typically do not exceed
    12&#160;months in duration. We cannot guarantee that we will be
    able to obtain long-term contracts in the future. The purchase
    orders that we receive can often be cancelled or revised without
    penalty. In the absence of a backlog of orders that can only be
    canceled with penalty, we plan production on the basis of
    internally generated
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    16
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    forecasts of demand, which makes it difficult to accurately
    forecast inventory requirements and sales. Large supply line
    commitments and large inventories of various components will be
    required to support our business and provide reasonable order
    fulfillment for customers. If we fail to accurately forecast
    operating requirements, our business may suffer and the value of
    your investment in us may decline.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Terrorism
    and the uncertainty of future terrorist attacks or war could
    reduce consumer confidence which could adversely affect our
    operating results.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Terrorist acts or acts of war may cause damage or disruption to
    our facilities, information systems, vendors, employees and
    customers, which could significantly harm our sales and results
    of operations. In the future, fears of war or additional acts of
    terrorism may have a negative effect on consumer confidence or
    consumer discretionary spending patterns, as well as have an
    adverse effect on the economy in general. This impact may be
    particularly harmful to our business because we expect to rely
    heavily on discretionary consumer spending and consumer
    confidence levels.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">RISKS
    RELATED TO MANUFACTURING</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    rely on two vendors to supply most of our
    microdisplays.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We do not currently own or operate any manufacturing facilities
    for microdisplays, one of the key components in our Video
    Eyewear products. We currently purchase almost all of the
    microdisplays used in our products from Kopin and eMagin. Kopin
    accounts for approximately 95% of our microdisplays by unit
    volume. We estimate that products incorporating Kopin
    microdisplays will account for approximately 56% of our sales in
    2009 and products incorporating eMagin microdisplays will
    account for approximately 19% of our sales in 2009. Our
    relationships with both Kopin and eMagin generally are on a
    purchase order basis and neither supplier has a contractual
    obligation to provide adequate supply, quality or acceptable
    pricing on a long-term basis. Both Kopin and eMagin could
    discontinue sourcing merchandise for us at any time. If Kopin or
    eMagin were to discontinue their relationships with us, or
    discontinue providing specific products to us, and we are unable
    to contract with a new supplier that can meet our requirements,
    or if Kopin or eMagin or such other supplier were to suffer a
    disruption in their production, we could experience disruption
    of our inventory flow, a decrease in sales and the possible need
    to redesign our products. Any such event could disrupt our
    operations and have an adverse effect on our business, financial
    condition and results of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Certain other components and services necessary for the
    manufacture of our products are available from only a limited
    number of sources, and other components and services are only
    available from a single source.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our inability to obtain sufficient quantities of high quality
    components or services on a timely basis could result in future
    manufacturing delays, increased costs and ultimately in reduced
    or delayed sales or lost orders which could materially and
    adversely affect our operating results.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    consumer electronics industry is subject to significant
    fluctuations in the availability of components. If we do not
    properly anticipate the need for critical components, we may be
    unable to meet the demands of our customers and
    end-users.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The availability of certain of the components that we require to
    produce our Video Eyewear products may decrease. As the
    availability of components decreases, the cost of acquiring
    those components ordinarily increases. High growth product
    categories have experienced chronic shortages of components
    during periods of exceptionally high demand. If we do not
    properly anticipate the need for or procure critical components,
    we may pay higher prices for those components, our gross margins
    may decrease and we may be unable to meet the demands of our
    customers and end-users, which could reduce our competitiveness,
    cause a decline in our market share and have a material adverse
    effect on our results of operations.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    17
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Unanticipated
    disruptions in our operations or slowdowns by our suppliers,
    distributors and shipping companies could adversely affect our
    ability to deliver our products and service our
    customers.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our ability to provide high quality customer service, process
    and fulfill orders and manage inventory depends on the
    efficient, timely and uninterrupted performance of our
    manufacturing and distribution facilities and our management
    information systems and the facilities and systems of our third
    party suppliers, distributors and shipping companies.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Any material disruption or slowdown in the operation of our
    manufacturing and distribution facilities or our management
    information systems, or comparable disruptions or slowdowns
    suffered by our principal suppliers, distributors or shippers
    could cause delays in our ability to receive, process and
    fulfill customer orders and may cause orders to be canceled,
    lost or delivered late, goods to be returned or receipt of goods
    to be refused. If any of these events occur, our sales and
    operating results could be materially and adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">If we
    acquire any companies or technologies in the future, they could
    prove difficult to integrate, disrupt our business, dilute
    stockholder value or have an adverse effect on our results of
    operations.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to expand our business primarily through internal
    growth, but from time to time we may consider strategic
    acquisitions. Any future acquisition would involve numerous
    risks including:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    potential disruption of our ongoing business and distraction of
    management;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    difficulty integrating the operations and products of the
    acquired business;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    unanticipated expenses related to technology integration;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    exposure to unknown liabilities, including litigation against
    the companies we may acquire;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    additional costs due to differences in culture, geographic
    locations and duplication of key talent;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    potential loss of key employees or customers of the acquired
    company.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Additionally, to finance an acquisition we may incur substantial
    amounts of indebtedness, which would affect our balance sheet
    and results of operations, or we may issue a substantial number
    of shares of our common stock, which may be dilutive to our
    stockholders. If we make acquisitions in the future,
    acquisition-related accounting charges may affect our balance
    sheet and results of operations. We may not be successful in
    addressing these risks or any other problems encountered in
    connection with any acquisitions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">RISKS
    RELATING TO THIS OFFERING</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    offering price for our units may not be indicative of their fair
    market value.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The offering price for our units was determined in the context
    of negotiations between us and the agents. Accordingly, the
    offering price may not be indicative of the true fair market of
    our company or the fair market value of our units. We are making
    no representations that the offering price of our units under
    this prospectus bears any relationship to our assets, book
    value, net worth or any other recognized criteria of our value.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">There
    is currently no trading market for our securities and an
    established trading market may not develop.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our securities are not currently listed or quoted on any
    national securities exchange or national quotation system. We
    have applied for the listing of the shares of our common stock
    included in the units offered under this prospectus and the
    shares of our common stock issuable upon exercise of the
    warrants included in the units offered under this prospectus on
    the <FONT style="white-space: nowrap">TSX-V.</FONT>
    We do not intend to list the warrants offered under this
    prospectus on any securities exchange. Listing of our common
    stock will be subject to fulfilling all of the requirements of
    the <FONT style="white-space: nowrap">TSX-V.</FONT>
    The <FONT style="white-space: nowrap">TSX-V,</FONT>
    or any other exchange or quotation system, may not permit our
    common stock to be listed and traded. Even if our common stock
    is accepted for listing on the
    <FONT style="white-space: nowrap">TSX-V,</FONT> the
    <FONT style="white-space: nowrap">TSX-V</FONT> has
    continuing listing requirements and we may not be able to comply
    with those requirements and maintain our listing. If we fail to
    obtain an initial listing on the
    <FONT style="white-space: nowrap">TSX-V,</FONT> we
    may seek quotation of our common stock on the OTC
    Bulletin&#160;Board of the US Financial Industry
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    18
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Regulatory Authority, Inc. (FINRA). The OTC Bulletin&#160;Board
    is an inter-dealer, over-the-counter market that provides
    significantly less liquidity and transparency than the
    <FONT style="white-space: nowrap">TSX-V.</FONT>
    Therefore, prices for securities traded solely on the OTC
    Bulletin&#160;Board may be difficult to obtain and holders of
    common stock may be unable to resell their securities at or near
    their original offering price or at any price.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Shares
    of our common stock eligible for future sale in the public
    marketplace may adversely affect the market price of our common
    stock.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The price of our common stock could decline if there are
    substantial sales of our common stock in the public stock market
    after this offering. Based on the number of shares of common
    stock outstanding as of the date of this prospectus, upon
    completion of this offering, we anticipate
    that&#160;&#149;&#160;shares of our common stock will be
    outstanding. All of the shares sold in this offering will be
    freely tradable without restriction or further registration
    under the Securities Act, except for any of those shares held by
    our &#147;affiliates,&#148; as that term is defined in
    Rule&#160;144 under the Securities Act, whose sales would be
    subject to the volume and manner of sale limitations of
    Rule&#160;144 described below. In addition,
    117,436,334&#160;shares of our common stock currently
    outstanding, or approximately&#160;&#149;&#160;% of our common
    stock outstanding after this offering, may be resold at any
    time, subject to the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements and
    <FONT style="white-space: nowrap">TSX-V</FONT> escrow
    arrangements described below. Our executive officers and
    directors currently own 82,987,673&#160;shares, or
    approximately&#160;&#149;&#160;% of our common stock outstanding
    after this offering, which are eligible for resale subject to
    the volume and manner of sale limitations of Rule&#160;144 and
    subject to the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements and
    <FONT style="white-space: nowrap">TSX-V</FONT> escrow
    arrangements described below. The remaining
    19,844,920&#160;shares of our common stock currently
    outstanding, or approximately&#160;&#149;&#160;% of our
    outstanding shares after this offering, are
    &#147;restricted&#148; under Rule&#160;144 and are eligible for
    sale under the provisions of Rule&#160;144. See &#147;Shares
    Eligible for Future Resale.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Additionally, under our fiscal advisory agreement with the
    Canadian agents, we are obligated to issue to the Canadian
    agents at the closing of this offering, in payment of a fiscal
    advisory fee, that number of shares of our common stock equal
    to, depending on the gross proceeds of the offering, between
    1.0% and 2.0% of our common stock issued and outstanding
    immediately upon the closing of the offering. The shares issued
    to the Canadian agents under our the agreement will be subject
    to resale restrictions in accordance with applicable Canadian
    securities laws and will be subject to resale restrictions for a
    period of one year following the closing of the offering under
    the <FONT style="white-space: nowrap">lock-up</FONT>
    agreements described below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    After this offering and the expiration of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    periods, the holders of an aggregate of 31,764,437&#160;shares
    of our common stock will have rights, subject to some
    conditions, to require us to include their shares in
    registration statements that we may file for ourselves or other
    stockholders. We also intend to register for resale all shares
    of common stock that we have issued and may issue under our
    option plans. Once we register these shares, subject to any
    <FONT style="white-space: nowrap">lock-up</FONT>
    restrictions, if any, they can be freely sold in the public
    market. Furthermore, our agents may, at their discretion and at
    any time without notice, release all or any portion of the
    securities from the restrictions on sale imposed by
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements. Due to these factors, sales of a substantial number
    of shares of our common stock in the public market could occur
    at any time. These sales, or the perception in the market that
    the holders of a large number of shares are able to or intend to
    sell shares, could reduce the market price of our common stock.
    See &#147;Dilution.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    market price of our common stock may be highly volatile and you
    may not be able to resell your shares at or above the initial
    public offering price.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to this offering, there has been no public market for our
    securities. We have applied for listing on the
    <FONT style="white-space: nowrap">TSX-V</FONT> of the
    shares of our common stock included in the units offered under
    this prospectus and the shares of our common stock issuable upon
    exercise of the warrants included in the units offered under
    this prospectus. An active trading market for our common stock
    may not develop following this offering. You may not be able to
    sell your shares quickly or at the market price if trading in
    our common stock is not active.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The market for our common stock will likely be characterized by
    significant price volatility when compared to more established
    issuers and we expect that it will continue to be so for the
    foreseeable future. The market price of our common stock is
    likely to be volatile for a number of reasons. First, our common
    stock is likely to be sporadically
    <FONT style="white-space: nowrap">and/or</FONT>
    thinly traded. As a consequence of this lack of liquidity, the
    trading of relatively small quantities of common stock by our
    stockholders may disproportionately influence the price of the
    common stock in either direction. The
</DIV>

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    <BR>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    price of the common stock could, for example, decline
    precipitously if even a relatively small number of shares are
    sold on the market without commensurate demand, as compared to a
    market for shares of an established issuer which could better
    absorb those sales without adverse impact on its share price.
    Secondly, we are a speculative or &#147;risky&#148; investment
    due to our small amount of sales and lack of profits to date and
    uncertainty of future market acceptance for our current and
    potential products or engineering services. As a consequence of
    this enhanced risk, more risk-adverse investors may, under the
    fear of losing all or most of their investment in the event of
    negative news or lack of progress, be more inclined to sell
    their shares on the market more quickly and at greater discounts
    than would be the case with the shares of an established issuer.
    We cannot make any predictions or projections as to what the
    prevailing market price for the common stock will be at any time
    or as to what effect the sale of common stock or the
    availability of common stock for sale at any time will have on
    the prevailing market price.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Purchasers
    of our units will experience immediate and substantial dilution
    as a result of their common stock being worth less on a net
    tangible book value basis than the amount they
    invested.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The price that will be paid by investors in this offering for
    our units will be significantly higher than the net tangible
    book value per share of our common stock. Purchasers of our
    units will experience immediate and substantial dilution of
    $&#160;&#149;&#160; assuming that all of the units offered under
    this prospectus are sold. In addition, a majority of our
    outstanding options, warrants, convertible debt and convertible
    preferred stock may be exercised for or converted into shares of
    our common stock at prices that are below the expected purchase
    price paid by investors in this offering. In connection with
    this offering, we will issue warrants as part of the units and
    agent options exercisable to purchase that number of shares of
    our common stock and warrants equal to 12.5% of the aggregate
    number of shares of our common stock and warrants sold under the
    offering (including the shares and warrants issued upon exercise
    of the over-allotment option), at the initial public offering
    price per share and warrant, for a period of 12&#160;months from
    the closing date. To the extent that these outstanding options,
    warrants, convertible debt or convertible preferred stock are
    exercised or converted, there may be further dilution to
    investors. In addition, under our fiscal advisory agreement with
    the Canadian agents, we are obligated to issue to the Canadian
    agents at the closing of this offering, in payment of a fiscal
    advisory fee, that number of shares of our common stock equal
    to, depending on the gross proceeds of the offering, between
    1.0% and 2.0% of our common stock issued and outstanding
    immediately upon the closing of the offering, which will further
    dilute investors. Accordingly, in the event we are liquidated,
    investors may not receive the full amount of their investment.
    See &#147;Dilution.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    management owns a significant percentage of our outstanding
    common stock. If the ownership of our common stock continues to
    be highly concentrated in management, it may prevent other
    stockholders from influencing significant corporate
    decisions.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our officers and directors currently own approximately 38% of
    the outstanding shares of our common stock. Following the
    completion of this offering (and assuming that all units offered
    under this prospectus are sold), our executive officers and
    directors will own approximately&#160;&#149;&#160;% of the
    outstanding shares of our common stock. As a result, our
    management will exercise significant control over matters
    requiring stockholder approval, including the election of our
    board of directors, the approval of mergers and other
    extraordinary transactions, as well as the terms of any of these
    transactions. This concentration of ownership could have the
    effect of delaying or preventing a change in our control or
    otherwise discouraging a potential acquirer from attempting to
    obtain control of us, which could in turn have an adverse effect
    on the fair market value of our company and our common stock.
    The interests of these and other of our existing stockholders
    may conflict with the interests of our other stockholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Management
    will have broad discretion as to the use of the proceeds from
    this offering, and may use the proceeds for purposes different
    from their current intent or not utilize the proceeds
    effectively.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    While we intend to use the net proceeds of this offering to fund
    capital expenditures and research and development, repay bank
    and certain other borrowings, and for general corporate
    purposes, including working capital, we will have broad
    discretion to adjust the application and allocation of the net
    proceeds in order to address changed circumstances and
    opportunities. The success of our operations that are influenced
    by capital expenditures, research and development and working
    capital allocations will be substantially dependent upon the
    discretion and judgment of our management with respect to the
    application and allocation of the net proceeds of this offering.
    Our management will have broad
</DIV>

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    <BR>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    discretion as to the application of the net proceeds and could
    use them for purposes other than those contemplated at the time
    of this offering. Moreover, our management may use the net
    proceeds for corporate purposes that may not lead to
    profitability or increase the fair market value of our company
    or our common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">It may
    be difficult for us to attract or retain qualified officers and
    directors, which could adversely affect our
    business.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a public company, the Sarbanes-Oxley Act of 2002
    (Sarbanes-Oxley) and the related rules and regulations of the
    SEC, as well as the rules and regulations of applicable Canadian
    securities regulators and the rules of the
    <FONT style="white-space: nowrap">TSX-V</FONT>
    (if&#160;our listing application is accepted), will require us
    to implement additional corporate governance practices and
    adhere to a variety of reporting requirements and complex
    accounting rules. Among other things, we will be subject to
    rules regarding the independence of the members of our board of
    directors and committees of the board and their experience in
    finance and accounting matters and certain of our executive
    officers will be required to provide certifications in
    connection with our quarterly and annual reports filed with the
    SEC and applicable Canadian securities regulators. The perceived
    increased personal risk associated with these rules may deter
    qualified individuals from accepting these positions.
    Accordingly, we may be unable to attract and retain qualified
    officers and directors. If we are unable to attract and retain
    qualified officers and directors, our business and our ability
    to obtain or maintain the listing of our shares of common stock
    on a stock exchange could be adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">If we
    fail to implement and maintain an effective system of internal
    controls, we may not be able to accurately report our financial
    results or prevent fraud and may fail to comply with SEC rules
    and the rules and regulations of applicable Canadian securities
    regulators.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We must implement and maintain effective internal financial
    controls for us to provide reliable and accurate financial
    reports and effectively prevent fraud. Implementation and
    maintenance of effective internal financial controls will depend
    on the effectiveness of our financial reporting and data systems
    and controls. We expect these systems and controls to become
    increasingly complex to the extent that our business grows. To
    effectively manage this growth, we will need to continue to
    improve our operational, financial and management controls and
    our reporting systems and procedures. We cannot be certain that
    these measures will ensure that we design, implement and
    maintain adequate controls over our financial processes and
    reporting in the future. Any failure to implement required new
    or improved controls, or difficulties encountered in their
    implementation or operation, could harm our operating results or
    cause us to fail to meet our financial reporting obligations.
    Inferior internal controls could also cause investors to lose
    confidence in our reported financial information, which could
    have a negative effect on the market price of our common stock
    and our access to capital.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Rules adopted by the SEC pursuant to Section&#160;404 of
    Sarbanes-Oxley require annual assessment of our internal control
    over financial reporting, and attestation of this assessment by
    our independent registered public accountants. Under the SEC
    rules currently in effect, both the management assessment of our
    internal control over financial reporting and the attestation of
    management&#146;s assessment by our independent registered
    public accountants will first apply to our annual report for the
    2009 fiscal year. The standards governing management&#146;s
    assessment of internal control over financial reporting are new
    and complex, and require significant documentation, testing and
    possible remediation to meet the detailed standards. In
    addition, the attestation process by our independent registered
    public accountants is new and we may encounter problems or
    delays in completing the implementation of any requested
    improvements and receiving an attestation of our assessment by
    our independent registered public accountants. If we cannot
    assess our internal control over financial reporting as
    effective, or our independent registered public accountants are
    unable to provide an unqualified attestation report on such
    assessment, investors could lose confidence in our reported
    financial information, which could have a negative effect on the
    market price of our common stock and our access to capital.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, management&#146;s assessment of internal controls
    over financial reporting may identify weaknesses and conditions
    that need to be addressed in our internal controls over
    financial reporting or other matters that may raise concerns for
    investors. Any actual or perceived weaknesses and conditions
    that need to be addressed in our internal control over financial
    reporting, disclosure of management&#146;s assessment of our
    internal controls over financial reporting, or disclosure of our
    independent registered public accounting firm&#146;s attestation
    to our report on management&#146;s assessment of our internal
    controls over financial reporting may have a negative effect on
    the market price of our common stock and our access to capital.
</DIV>

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    <BR>
    21
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We
    will incur significant increased costs as a result of operating
    as a public company, and our management will be required to
    devote substantial time to new compliance
    initiatives.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a public company, we will incur significant legal, accounting
    and other expenses that we did not incur as a private company.
    In addition, Sarbanes-Oxley and the related rules and
    regulations of the SEC, as well as the rules and regulations of
    applicable Canadian securities regulators and the rules of the
    <FONT style="white-space: nowrap">TSX-V</FONT> (if
    our listing application is accepted), impose various
    requirements on public companies, including requiring changes in
    corporate governance practices. Our management and other
    personnel will need to devote a substantial amount of time to
    these compliance initiatives. Moreover, these rules and
    regulations will increase our legal and financial compliance
    costs and will make some activities more time-consuming and
    costly. For example, we expect these new rules and regulations
    to make it more difficult and more expensive for us to obtain
    director and officer liability insurance, and we may be required
    to incur substantial costs to maintain the same or similar
    coverage. Compliance with Section&#160;404 of Sarbanes-Oxley
    will also require that we incur substantial accounting expenses
    and expend significant management efforts.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    common stock may be considered a &#147;penny stock,&#148; and
    thereby be subject to additional sale and trading regulations
    that may make it more difficult to sell.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our common stock, which is not currently listed or quoted on any
    national securities exchange or national quotation system, may
    be considered to be a &#147;penny stock&#148; if it does not
    qualify for one of the exemptions from the definition of
    &#147;penny stock&#148; under
    <FONT style="white-space: nowrap">Rule&#160;3a51-1</FONT>
    under the Securities Exchange Act of 1934 (Exchange Act). Our
    common stock may be a &#147;penny stock&#148; if it meets one or
    more of the following conditions (i)&#160;the stock trades at a
    price less than $5.00 per share; (ii)&#160;it is not traded on a
    &#147;recognized&#148; national exchange; (iii)&#160;it is not
    quoted on the NASDAQ Capital Market, or even if so, has a price
    less than $5.00 per share; or (iv)&#160;is issued by a company
    that has been in business less than three years with net
    tangible assets less than $5&#160;million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The principal result or effect of being designated a &#147;penny
    stock&#148; is that US securities broker-dealers participating
    in sales of our common stock will be subject to the &#147;penny
    stock&#148; regulations set forth in
    <FONT style="white-space: nowrap">Rules&#160;15g-2</FONT>
    through
    <FONT style="white-space: nowrap">15g-9</FONT>
    promulgated under the Exchange Act. For example,
    <FONT style="white-space: nowrap">Rule&#160;15g-2</FONT>
    requires broker-dealers dealing in penny stocks to provide
    potential investors with a document disclosing the risks of
    penny stocks and to obtain a manually signed and dated written
    receipt of the document at least two business days before
    effecting any transaction in a penny stock for the
    investor&#146;s account. Moreover,
    <FONT style="white-space: nowrap">Rule&#160;15g-9</FONT>
    requires broker-dealers in penny stocks to approve the account
    of any investor for transactions in such stocks before selling
    any penny stock to that investor. This procedure requires the
    broker-dealer to (i)&#160;obtain from the investor information
    concerning his or her financial situation, investment experience
    and investment objectives; (ii)&#160;reasonably determine, based
    on that information, that transactions in penny stocks are
    suitable for the investor and that the investor has sufficient
    knowledge and experience as to be reasonably capable of
    evaluating the risks of penny stock transactions;
    (iii)&#160;provide the investor with a written statement setting
    forth the basis on which the broker-dealer made the
    determination in (ii)&#160;above; and (iv)&#160;receive a signed
    and dated copy of such statement from the investor, confirming
    that it accurately reflects the investor&#146;s financial
    situation, investment experience and investment objectives.
    Compliance with these requirements may make it more difficult
    and time consuming for holders of our common stock to resell
    their shares to third parties or to otherwise dispose of them in
    the market or otherwise.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We do
    not intend to pay dividends on our common stock.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have never declared or paid any cash dividends on our common
    stock. We currently intend to retain our future earnings, if
    any, to finance the operation and growth of our business and do
    not expect to pay any cash dividends.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    certificate of incorporation, by-laws and Delaware law may
    discourage takeovers and business combinations that our
    stockholders might consider in their best
    interests.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Provisions in our certificate of incorporation and by-laws may
    delay, defer, prevent or render more difficult a takeover
    attempt that our stockholders might consider in their best
    interests. Even in the absence of a takeover attempt, the
    existence of these provisions may adversely affect the market
    value of our common stock if they are
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    22
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    viewed as discouraging takeover attempts in the future. See
    &#147;Description of Capital Stock&#148; for additional
    information on the anti-takeover measures applicable to us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Provisions in our restated certificate of incorporation and
    amended and restated bylaws, as well as provisions of Delaware
    law, could make it more difficult for a third party to acquire
    us, even if doing so would benefit our stockholders. Our
    certificate of incorporation and bylaws:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    provide that the authorized number of directors may be changed
    only by resolution of the board of directors;
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    provide that all vacancies, including newly created
    directorships, may, except as otherwise required by law, be
    filled by the affirmative vote of a majority of directors then
    in office, even if such number is less than a quorum;
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    require that any action to be taken by our stockholders be
    effected at a duly called annual or special meeting of
    stockholders and not by written consent;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    provide that stockholders seeking to present proposals before a
    meeting of stockholders or to nominate candidates for election
    as directors at a meeting of stockholders must provide notice in
    writing in a timely manner, and also specify requirements as to
    the form and content of a stockholder&#146;s notice;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    do not provide for cumulative voting rights, therefore allowing
    the holders of a majority of the shares of our common stock
    entitled to vote in any election of directors to elect all of
    the directors standing for election, if they should so
    choose;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    provide that special meetings of our stockholders may be called
    only by the chairman of the board, our chief executive officer
    or by the board of directors pursuant to a resolution adopted by
    a majority of the total number of authorized directors.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The amendment of any of these provisions would require approval
    by the holders of at least
    66<FONT style="vertical-align: text-top; font-size: 70%;">2</FONT>/<FONT style="font-size: 70%;">3</FONT>%
    of our then outstanding capital stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, we may become subject to Section&#160;203 of the
    Delaware General Corporation Law, which generally prohibits a
    Delaware corporation from engaging in any of a broad range of
    business combinations with an interested stockholder for a
    period of three years following the date on which the
    stockholder became an interested stockholder. This provision
    could have the effect of delaying or preventing a change of
    control, whether or not it is desired by or beneficial to our
    stockholders.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We can
    issue other series of shares of preferred stock that may
    adversely affect your rights as a holder of our common stock or
    warrants.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date of this prospectus, we are authorized to issue up
    to 6,745,681&#160;shares of preferred stock. Prior to the time
    the registration statement of which this prospectus forms a part
    becomes effective, the number of shares of preferred stock we
    are authorized to issue will be reduced to 5,000,000 shares. The
    designations, rights and preferences of our preferred stock may
    be determined from time-to-time by our board of directors.
    Accordingly, our board of directors is empowered, without
    shareholder approval, to issue one or more series of preferred
    stock with dividend, liquidation, conversion, voting or other
    rights superior to those of the holders of our common stock. For
    example, an issuance of shares of preferred stock could:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    adversely affect the voting power of the holders of our common
    stock;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    make it more difficult for a third party to gain control of us;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    discourage bids for our common stock;
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    limit or eliminate any payments that the holders of our common
    stock could expect to receive upon our liquidation;&#160;or
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    adversely affect the market price of our common stock.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    168,500&#160;shares of our Series&#160;C Preferred Stock were
    outstanding as of the date of this prospectus. We have agreed
    with the agents to use our best efforts to cause all of the
    outstanding shares of our Series&#160;C Preferred Stock,
    together with all dividends accrued and unpaid thereon, to be
    converted into common stock prior to the effective time of the
    registration statement of which this prospectus forms a part.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    23
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">We may
    need to raise additional funds.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our operations to date have consumed substantial amounts of
    cash, and we expect our capital and operating expenditures to
    increase in the next few years. We believe that our existing
    capital resources and anticipated cash flow from planned
    operations, together with the net proceeds of this offering,
    should be adequate to satisfy our cash requirements for the next
    12&#160;months. However, we may need significant additional
    capital before that time. Any additional required financing may
    not be available on acceptable terms or at all. If we raise
    additional funds by issuing equity securities or convertible
    debt securities, further dilution to existing stockholders may
    result. If adequate funds are not available, our business,
    financial condition and results of operations and the market
    price of our common stock would be materially adversely affected.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Adverse
    capital and credit market conditions may significantly affect
    our ability to meet liquidity needs, access to capital and cost
    of capital.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have historically relied on private placements of equity and
    debt to fund our operating losses and capital expenditure. The
    capital and credit markets have been experiencing extreme
    volatility and disruption for more than 12&#160;months.
    Disruptions, uncertainty or volatility in the capital and credit
    markets may limit our ability to access the capital necessary to
    operate and grow our business. Adverse capital and credit market
    conditions may force us to delay raising capital or bear an
    unattractive cost of capital which could significantly reduce
    our financial flexibility. Our results of operations, financial
    condition, cash flows and capital position and the market value
    of our common stock could be materially adversely affected by
    disruptions in the financial markets.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Our
    ability to utilize our net operating loss carryforwards and
    certain other tax attributes is limited.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of March&#160;31, 2009, we had net operating loss
    carryforwards of approximately $12.5&#160;million for Federal
    and state income tax purposes. Under Section&#160;382 of the
    Internal Revenue Code, if a corporation undergoes an
    &#147;ownership change,&#148; the corporation&#146;s ability to
    use its pre-change net operating loss carryforwards and other
    pre-change tax attributes to offset its post-change income may
    be limited. An ownership change is defined for these purposes as
    a greater than 50% change in its equity ownership by value over
    a three-year period. We may also experience ownership changes in
    the future as a result of this offering or subsequent changes in
    our stock ownership.
</DIV>
<A name='105'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">FORWARD-LOOKING
    STATEMENTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus contains, in addition to historical information,
    forward-looking statements. These statements are based on our
    management&#146;s beliefs and assumptions and on information
    currently available to our management. The forward-looking
    statements are contained principally under the headings
    &#147;Prospectus Summary,&#148; &#147;Risk Factors,&#148;
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations,&#148; &#147;Use of
    Proceeds&#148; and &#147;Business.&#148; Forward-looking
    statements include statements concerning:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our possible or assumed future results of operations;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our business strategies;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our ability to attract and retain customers;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our ability to sell additional products and services to
    customers;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our cash needs and financing plans;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our competitive position;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our industry environment;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    our potential growth opportunities;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    expected technological advances by us or by third parties and
    our ability to leverage them;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the effects of future regulation;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the effects of competition.
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    24
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All statements in this prospectus that are not historical facts
    are forward-looking statements. We may, in some cases, use terms
    such as &#147;anticipates,&#148; &#147;believes,&#148;
    &#147;could,&#148; &#147;estimates,&#148; &#147;expects,&#148;
    &#147;intends,&#148; &#147;may,&#148; &#147;plans,&#148;
    &#147;potential,&#148; &#147;predicts,&#148;
    &#147;projects,&#148; &#147;should,&#148; &#147;will,&#148;
    &#147;would&#148; or similar expressions that convey uncertainty
    of future events or outcomes to identify forward-looking
    statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The outcome of the events described in these forward-looking
    statements are subject to known and unknown risks, uncertainties
    and other factors that may cause our actual results, performance
    or achievements to be materially different from any future
    results, performances or achievements expressed or implied by
    the forward-looking statements. These important factors include
    our financial performance and the other important factors we
    discuss in greater detail in &#147;Risk Factors.&#148; You
    should read these factors and the other cautionary statements
    made in this prospectus as applying to all related
    forward-looking statements wherever they appear in this
    prospectus. Given these factors, you should not place undue
    reliance on these forward-looking statements. Also,
    forward-looking statements represent our management&#146;s
    beliefs and assumptions only as of the date on which the
    statements are made. We undertake no obligation to publicly
    update any forward-looking statements, whether as a result of
    new information, future events or otherwise, except as required
    by law. You should read this prospectus and the documents that
    we reference in this prospectus and have filed as exhibits to
    the registration statement, of which this prospectus is a part,
    completely and with the understanding that our actual future
    results may be materially different from what we currently
    expect.
</DIV>
<A name='106'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">USE OF
    PROCEEDS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We estimate that the net proceeds of this offering will be
    approximately Cdn$&#160;&#149;&#160; million, based upon an
    assumed initial public offering price of Cdn$&#160;&#149;&#160;
    per unit, and after deducting estimated underwriting discounts
    and commissions and offering expenses. If the agents exercise
    their over-allotment option in full, we estimate that the net
    proceeds will be approximately Cdn$&#160;&#149;&#160; million.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We plan to use $916,065 of our net proceeds from this offering
    to repay the outstanding principal amounts of and interest
    accrued on our lines of credit and notes payable, including
    $95,000 in principal amount plus interest payable to Paul J.
    Travers, our President and Chief Executive Officer, under a
    revolving loan agreement that we entered into with
    Mr.&#160;Travers in October 2008. We intend to use the remainder
    of the net proceeds from this offering for:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    research and development expenses;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    capital expenditures;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    selling, marketing, general and administrative expenses;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    possible acquisitions of businesses, technologies or other
    assets;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    general corporate purposes.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to continue our development of new products that
    leverage our advancements in our optics and electronics
    technology. We believe that these new technologies, if
    successfully implemented, will result in significant performance
    improvements in our products and as a result increase our
    overall customer demand. We anticipate expending an aggregate of
    approximately $3.0&#160;million on product design, development
    and tooling and our current development plans by product line
    are as follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="85%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="13%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Targeted<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>New Product Development Objectives</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Completion Date</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Wrap Video Eyewear (consumer)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Fall 2009
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Blade Video Eyewear (consumer)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Spring 2010
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Blade Tac-Eye (defense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Summer 2010
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Blade low vision-assist product
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Fall 2010
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Blade&#160;II display engine
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Spring 2011
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    25
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To expand our manufacturing floor and our internal research and
    development equipment we intend to invest approximately $211,000
    over the next 18&#160;months. And to support our overall growth
    we intend to invest approximately $166,000 in new computer
    hardware and software over the next 18&#160;months.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To assist in the marketing of our new Wrap Video Eyewear
    products we intend to invest up to $780,000 in point of purchase
    (POP) display systems to show case our new products at retail
    outlets. We estimate that this amount would allow us place our
    POP display systems in approximately 1600 retail outlets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Although we may use a portion of the net proceeds to acquire
    businesses, technologies or other assets, we have no agreements
    or arrangements with respect to any such transactions at the
    present time.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Notwithstanding the foregoing, we cannot specify with certainty
    the uses for the net proceeds to be received upon the completion
    of this offering. Our management will have broad discretion as
    to how to spend and invest approximately Cdn$&#160;&#149;&#160;
    million of the net proceeds of this offering, and investors will
    be relying on the judgment of our management regarding the
    application of these proceeds. You will not have the opportunity
    to evaluate the economic, financial or other information on
    which we base our decisions on how to use these proceeds. The
    timing and amount of our actual expenditures will be based on
    many factors, including cash flows from operations, available
    technology advances and the growth of our business. The funds
    may not be fully used for a significant period following the
    closing of the offering. Pending the uses described above, we
    intend to invest the net proceeds from this offering in
    short-term, investment grade, interest bearing securities. We
    cannot predict whether the proceeds invested will yield a
    favorable return.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Although we intend to use the proceeds from the offering as set
    forth above, the actual amount that we spend in connection with
    each intended use of the proceeds may vary significantly from
    the amounts specified above and will be dependent on a number of
    factors, including those referenced under &#147;Risk
    Factors&#148;.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have agreed with Mr.&#160;Travers and Grant Russell, our
    Executive Vice President and Chief Financial Officer, that we
    will pay them deferred compensation in the aggregate amount of
    $445,096, plus interest at the annual rate of 8.0%, and $209,208
    in aggregate principal amount, plus interest at the annual rate
    of 8.0%, in repayment of loans made to us more than five years
    ago by those officers to finance our operations, either in one
    lump sum on or before the first anniversary of the closing of
    this offering from the proceeds of the exercise of the warrants
    included in the units and the agents&#146; warrants if and when
    at least 50% of those warrants are exercised or otherwise in 12
    equal monthly installments beginning on the first anniversary of
    the closing of this offering until paid in full. Any additional
    proceeds from any exercise of the warrants included in the units
    and the agents&#146; warrants will be used for working capital.
    If all of these warrants were to be exercised, we would receive
    additional funds totaling approximately Cdn$&#160;&#149;&#160;.
    These warrants may not be exercised before they
    expire&#160;&#149;&#160;&#160;months after the closing of this
    offering.
</DIV>
<A name='107'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DIVIDEND
    POLICY</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have never declared or paid any cash dividends on our common
    stock. We currently intend to retain all available funds and any
    future earnings to support our operations and finance the growth
    and development of our business. We do not intend to pay cash
    dividends on our common or preferred stock for the foreseeable
    future. Any future determination related to dividend policy will
    be made at the discretion of our board of directors.
    Additionally, our lines of credit prohibit us from paying cash
    dividends at any time at which any amount remains outstanding
    under the lines. Although the outstanding principal amounts of
    and interest accrued on our lines of credit will be paid in full
    from the proceeds of this offering we expect that we will draw
    down on the lines of credit from time to time after this
    offering. We are not subject to any restrictions that would
    prevent us from paying a dividend except for the restrictions
    under our lines of credit and restrictions under
    <FONT style="white-space: nowrap">TSX-V</FONT>
    policies, our certificate of incorporation and bylaws and the
    Delaware General Corporation Law.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    26
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='108'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CAPITALIZATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth our cash and cash equivalents and
    our capitalization as of March&#160;31, 2009:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    on an actual basis;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    on a pro forma basis based on an assumed initial public offering
    price of Cdn$&#160;&#149;&#160; per unit, to give effect to the
    conversion of (i)&#160;168,500&#160;shares of our Series&#160;C
    Preferred Stock outstanding immediately prior to the closing of
    this offering, together with all dividends accrued and unpaid
    thereon, at the conversion price of $0.2917 per share into
    7,060,914&#160;shares of our common stock; and (ii)&#160;$75,000
    in aggregate principal amount of convertible promissory notes,
    together with all interest accrued and unpaid thereon, at the
    conversion price of $0.057089 per share into
    2,251,985&#160;shares of our common stock;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    on a <I>pro forma </I>as adjusted basis to give effect to the
    events described above and the sale of&#160;&#149;&#160;units in
    this offering at an assumed initial offering price of
    Cdn$&#160;&#149;&#160; per unit, after deducting estimated
    underwriting discounts and commissions and offering expenses of
    Cdn$&#160;&#149;&#160; million, and the issuance
    of&#160;&#149;&#160;&#160;shares of our common stock to the
    Canadian agents in payment of a fiscal advisory fee.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You should read the information in this table together with our
    consolidated financial statements and accompanying notes and
    &#147;Management&#146;s Discussion and Analysis of Financial
    Condition and Results of Operations&#148; appearing elsewhere in
    this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="64%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>March&#160;31, 2009</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Pro Forma<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Actual</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Pro Forma</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As Adjusted</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash and cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    259,151
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Long-term debt (non-convertible) and related accrued interest
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,286,643
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued cumulative preferred dividends
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    349,574
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Convertible promissory notes and bridge loans and related
    accrued interest
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    126,191
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total long-term obligations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,762,408
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stockholders&#146; Equity:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Preferred stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Series&#160;C preferred stock ($0.001&#160;par value),
    500,000&#160;shares authorized and 168,500&#160;shares issued
    and outstanding
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    169
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common stock ($0.001&#160;par value), 400,000,000&#160;shares
    authorized, 220,268,927&#160;shares issued and outstanding,
    actual;&#160;&#149;&#160;&#160;shares issued and outstanding,
    pro forma as adjusted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    220,269
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Additional paid-in capital
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,039,100
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Subscriptions receivable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (321,517
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Accumulated deficit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (15,161,140
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 30pt">
    Total stockholders&#146; equity (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,223,119
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 40pt">
    Total capitalization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (201,560
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    27
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The number of shares of common stock to be outstanding
    immediately after this offering is based on the number of shares
    outstanding as of March&#160;31, 2009 and an assumed offering
    of&#160;&#149;&#160;&#160;units at an initial public offering
    price of Cdn$&#160;&#149;&#160; per unit, and excludes:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    15,304,554&#160;shares of our common stock issuable upon
    exercise of then outstanding options under our 2007 option plan,
    having a weighted average exercise price of $0.0999 per share;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    30,000,000&#160;shares of our common stock reserved for issuance
    upon exercise of options under our 2009 option plan, none of
    which had then been granted;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    7,000,000&#160;shares of our common stock reserved for issuance
    upon exercise of options under our 2009&#160;directors option
    plan, none of which had then been granted; and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    7,172,160&#160;shares of our common stock issuable upon exercise
    of outstanding warrants, having a weighted average exercise
    price of $0.1815 per share.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In consideration of certain fiscal advisory services rendered by
    the Canadian agents to us pursuant to a fiscal advisory fee
    agreement between us and the Canadian agents, we have agreed to
    issue to the Canadian agents at the closing of this offering, in
    payment of a fiscal advisory fee, that number of shares of our
    common stock equal to, depending on the gross proceeds of the
    offering, between 1.0% and 2.0% of our common stock issued and
    outstanding immediately upon the closing of the offering. The
    issuance of these shares to the Canadian agents is not covered
    by this prospectus. These shares will be issued pursuant to
    exemptions from the registration requirements of applicable
    United States and Canadian securities laws and subject to resale
    restrictions under those laws and a
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreement for one year. See &#147;Underwriting&#160;&#151;
    Fiscal Advisory Fee Agreement.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Consolidated
    Capitalization</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Except as disclosed in the table above, there have been no
    material changes in our share and loan capital since
    December&#160;31, 2008.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    28
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='109'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DILUTION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If you invest in our units in this offering, your ownership
    interest will be diluted to the extent of the difference between
    the initial public offering price per unit and the pro forma net
    tangible book value per share of our common stock after this
    offering. The historical net tangible book value of our common
    stock as of March&#160;31, 2009 was a deficit of approximately
    $&#160;&#149;&#160; million, or $(&#160;&#149;&#160;) per share,
    based on the number of shares outstanding as of March&#160;31,
    2009. Historical net tangible book value per share is determined
    by dividing the number of outstanding shares of our common stock
    into our total tangible assets, or total assets less intangible
    assets, less our total liabilities and less the carrying value
    of our total convertible preferred stock. Investors
    participating in this offering will incur immediate, substantial
    dilution. Our pro forma net tangible book value as of
    March&#160;31, 2009 was a deficit of approximately
    $&#160;&#149;&#160; million, or approximately
    $(&#160;&#149;&#160;) per share. Pro forma net tangible book
    value per share represents the amount of our total tangible
    assets less our total liabilities, divided by the pro forma
    number of shares of our common stock outstanding after giving
    effect to the conversion of all outstanding shares of our
    Series&#160;C Preferred Stock, together with all dividends
    accrued and unpaid thereon, into 7,060,914&#160;shares of our
    common stock and $75,000 in aggregate principal amount of
    convertible promissory notes, together with all interest accrued
    and unpaid thereon, into 2,251,985&#160;shares of our common
    stock upon completion of this offering. After giving effect to
    the sale of&#160;&#149;&#160;&#160;units in this offering at an
    assumed initial public offering price of Cdn$&#160;&#149;&#160;
    per unit, and after deducting estimated underwriting discounts
    and commissions and offering expenses and the repayment of
    $&#160;&#149;&#160;million of outstanding notes payable, along
    with accrued interest, and the issuance
    of&#160;&#149;&#160;&#160;shares of our common stock to the
    Canadian agents in payment of a fiscal advisory fee, our pro
    forma as adjusted net tangible book value as of March&#160;31,
    2009 would have been approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million, or approximately
    $&#160;&#149;&#160; per share of common stock. This represents
    an immediate increase in pro forma as adjusted net tangible book
    value of $&#160;&#149;&#160; per share to existing stockholders,
    and an immediate dilution of Cdn$&#160;&#149;&#160; share to
    investors participating in this offering. The following table
    illustrates this per share dilution:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="90%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Assumed initial public offering price per unit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Historical net tangible book value per share as of
    March&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0210
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Increase in net tangible book value deficit per share
    attributable to conversion of preferred stock and convertible
    notes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.0076
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Pro forma net tangible book value deficit per share as of
    March&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#149;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Increase in net tangible book value per share attributable to
    investors participating in this offering
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#149;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Pro forma as adjusted net tangible book value per share after
    this offering
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Pro forma dilution per share to investors participating in this
    offering
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#149;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes, on a pro forma as adjusted basis
    as of March&#160;31, 2009, the differences between the number of
    shares of common stock purchased from us, the total
    consideration and the average price per share paid by existing
    stockholders and by investors participating in this offering,
    before deducting estimated underwriting discounts and
    commissions and offering expenses, at an assumed initial public
    offering price of Cdn$&#160;&#149;&#160; per unit:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="39%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares Purchased</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total Consideration</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average Price<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Number</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percent</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percent</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>per Share</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Existing stockholders before this offering
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    220,268,927
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#149;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12,897,165
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0585
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Investors participating in this offering
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#149;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#149;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#149;&#160;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    100
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The discussion and tables above assume no exercise of the
    over-allotment option, the agents&#146; warrants or any other
    options or warrants outstanding on the date of this prospectus.
    If the overallotment option and the agents&#146; warrants are
    exercised in full, the number of shares of common stock held by
    existing stockholders will be reduced to&#160;&#149;&#160;% of
    the total number of shares of common stock to be outstanding
    after this offering, and the number of
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    29
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    shares of common stock held by investors participating in this
    offering will be increased to&#160;&#149;&#160;shares
    or&#160;&#149;&#160;% of the total number of shares of common
    stock outstanding after this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In consideration of certain fiscal advisory services rendered by
    the Canadian agents to us pursuant to a fiscal advisory fee
    agreement between us and the Canadian agents, we have agreed to
    issue to the Canadian agents at the closing of this offering, in
    payment of a fiscal advisory fee, that number of shares of our
    common stock equal to, depending on the gross proceeds of the
    offering, between 1.0% and 2.0% of our common stock issued and
    outstanding immediately upon the closing of the offering. The
    issuance of these shares to the Canadian agents is not covered
    by this prospectus.  These shares will be issued pursuant to
    exemptions from the registration requirements of applicable
    United States and Canadian securities laws and subject to resale
    restrictions under these laws and a
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreement for one year. See &#147;Underwriting&#160;&#151;
    Fiscal Advisory Fee Agreement.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The share data in the table above is based on the number of
    shares outstanding as of March&#160;31, 2009 and an assumed
    offering of&#160;&#149;&#160;&#160;units at an initial public
    offering price of $&#160;&#149;&#160; per unit, and excludes:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    15,304,554&#160;shares of our common stock issuable upon
    exercise of options then outstanding under our 2007 option plan,
    having a weighted average exercise price of $0.0883 per share;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    30,000,000&#160;shares of our common stock reserved for issuance
    upon exercise of options under our 2009 option plan, none of
    which had then been granted;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    7,000,000&#160;shares of our common stock reserved for issuance
    upon exercise of options under our 2009&#160;directors&#146;
    option plan, none of which had then been granted;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    7,172,160&#160;shares of common stock issuable upon exercise of
    then outstanding warrants, having a weighted average exercise
    price of $0.1815 per share.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To the extent that any of these options or warrants are
    exercised, new options are issued under our equity incentive
    plans or we issue additional shares of common stock in the
    future, there will be further dilution to investors
    participating in this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Quantitative
    and Qualitative Disclosures about Market Risk</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Foreign
    Currency Exchange Risk</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In 2008, approximately 85% of our total sales were comprised of
    sales to customers in the United States and 15% were comprised
    of sales to customers outside the United States. Of our sales
    received in 2008 from customers outside of the United States,
    95% were paid in currencies other than US dollars. Therefore,
    our results could be negatively affected by such factors as
    changes in foreign currency exchange rates, trade protection
    measures and changes in regional or worldwide economic or
    political conditions. We also buy many components manufactured
    in other countries in transactions denominated in US dollars.
    The domestic currencies of some of those suppliers fluctuate
    with the US dollar. As a result, changes in the cost of our
    components can occur with each new purchase. A decrease in the
    value of the US dollar against our supplier&#146;s domestic
    currencies could negatively and materially affect our
    manufacturing costs. A 10% change in the value of the US dollar
    relative to each of the foreign currencies in which our sales
    are denominated would have resulted in a change in our sales of
    no more than 2%. Historically, we have not tried to reduce our
    exposure to exchange rate fluctuations by engaging in hedging
    activities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Interest
    Rate Risk</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At December&#160;31, 2008, we had unrestricted cash and cash
    equivalents totaling $818,719, and at December&#160;31, 2007 we
    had unrestricted cash and cash equivalents totaling $364,856.
    These amounts were not held in interest-bearing accounts. The
    unrestricted cash and cash equivalents were held for working
    capital purposes. We do not enter into investments for trading
    or speculative purposes. The interest rates on our $879,208 of
    notes payable outstanding at December&#160;31, 2008 are fixed at
    a range of between 7.5% and 12.0% and a weighted average range
    of approximately&#160;10%. If market interest rates increase,
    the fair value of our notes payable would decrease.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    30
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Recent
    Accounting Pronouncements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In December 2007, the Financial Accounting Standards Board
    (FASB) issued Statement of Financial Accounting Standard (SFAS)
    No.&#160;141(R), <I>Business Combinations</I>, a revision to
    SFAS&#160;No.&#160;141, <I>Business Combinations
    </I>(SFAS&#160;No.&#160;141(R)). SFAS&#160;No.&#160;141(R)
    provides revised guidance for recognition and measurement of
    identifiable assets and goodwill acquired, liabilities assumed
    and any non-controlling interest in the acquiree at fair value.
    The statement also establishes disclosure requirements to enable
    the evaluation of the nature and financial effects of a business
    combination. SFAS&#160;No.&#160;141(R) is required to be applied
    prospectively to business combinations for which the acquisition
    date is on or after January&#160;1, 2009. The impact of the
    adoption of SFAS&#160;141(R) on our consolidated financial
    position and results of operations for the first quarter of 2009
    did not have a material effect on our consolidated financial
    statements. Any subsequent impact will be dependent on the size
    and nature of business combinations, if any, completed in the
    future.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In December 2007, the FASB issued SFAS&#160;No.&#160;160,
    <I>Non-controlling Interests in Consolidated Financial
    Statements&#160;&#151; an amendment of ARB No.&#160;51
    </I>(SFAS&#160;No.&#160;160). This statement establishes
    accounting and reporting standards for ownership interests in
    subsidiaries held by parties other than the parent.
    Specifically, SFAS&#160;No.&#160;160 requires the presentation
    of non-controlling interests as equity in the Consolidated
    Balance Sheets, and separate identification and presentation in
    the Consolidated Statements of Income of net income attributable
    to the entity and the non-controlling interest. It also
    establishes accounting and reporting standards regarding
    deconsolidation and changes in a parent&#146;s ownership
    interest. SFAS&#160;No.&#160;160 is effective as of
    January&#160;1, 2009. The provisions of SFAS&#160;No.&#160;160
    are generally required to be applied prospectively, except for
    the presentation and disclosure requirements, which must be
    applied retrospectively. The adoption of SFAS&#160;No.&#160;160
    did not have a material effect on our consolidated financial
    statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In February 2008, the FASB issued FASB Staff Position (FSP)
    <FONT style="white-space: nowrap">No.&#160;FAS&#160;157-2,</FONT>
    <I>Effective Date of SFAS&#160;No.&#160;157</I>. This FSP delays
    the effective date of SFAS&#160;No.&#160;157 for all
    non-financial assets and non-financial liabilities, except those
    that are recognized or disclosed at fair value in the
    consolidated financial statements on a recurring basis (at least
    annually). This FSP partially deferred the effective date of
    SFAS&#160;No.&#160;157 to fiscal years beginning after
    November&#160;15, 2008, and interim periods within those fiscal
    years for items within the scope of this FSP. We adopted this
    FSP in the first quarter of fiscal year 2009, and did not have a
    material impact on our consolidated financial statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In March 2008, the FASB issued SFAS&#160;No.&#160;161,
    <I>Disclosures about Derivative Instruments and Hedging
    Activities, an amendment of FASB Statement No.&#160;133</I>
    (SFAS&#160;No.&#160;161). This statement enhances the disclosure
    requirements related to derivative instruments and hedging
    activity to improve the transparency of financial reporting, and
    is effective for fiscal years and interim periods beginning
    after November&#160;15, 2008. The adoption of
    SFAS&#160;No.&#160;161 did not have a material effect on our
    consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    31
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='110'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SELECTED
    FINANCIAL AND OTHER DATA</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following tables present our summary financial data and
    should be read together with our financial statements and
    accompanying notes and &#147;Management&#146;s Discussion and
    Analysis of Financial Condition and Results of Operations&#148;
    appearing elsewhere in this prospectus. The summary financial
    data for the years ended December&#160;31, 2008, 2007 and 2006
    are derived from our audited annual financial statements, which
    are included elsewhere in this prospectus. The unaudited summary
    financial data as of March&#160;31, 2009 and for the three
    months ended March&#160;31, 2009 and 2008 have been derived from
    our unaudited interim financial statements, which are included
    elsewhere in this prospectus, and include all adjustments,
    consisting of normal recurring adjustments, necessary for a fair
    presentation of our financial position and results of operations
    for these periods.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="30%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Three Months Ended March&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Statement of Operations Data</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Sales</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12,564,487
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10,146,379
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    9,538,308
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,043,994
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,720,914
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Cost of Sales</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,863,508
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,783,473
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,767,550
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,856,683
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,487,349
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Gross Margin</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,700,979
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,362,906
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,770,758
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,187,311
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    233,565
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Operating Expenses</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Research and development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,366,518
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,365,412
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,279,239
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    502,011
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    736,716
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Selling and marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,128,625
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,920,164
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,191,800
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    449,266
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    449,562
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    General and administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,299,685
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,718,627
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,560,278
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    478,253
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    533,799
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Depreciation and amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    510,133
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    374,078
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    276,989
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    138,834
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    123,696
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Total operating expenses</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,304,961
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,378,281
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,308,306
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,568,364
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,843,773
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Profit (Loss) from operations</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4,603,982
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,015,375
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (537,548
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (381,053
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,610,208
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest and other income (expense)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    188
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,549
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    313
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Foreign exchange (loss) gain
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (24,216
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,272
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    366
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Interest expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (260,977
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (241,692
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (179,019
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (65,376
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (41,600
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Legal settlement
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    96,632
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Tax (expense) benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (5,212
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    98,372
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,700
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (888
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (753
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Total tax and other income (expense)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (290,217
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (44,139
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (182,406
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (67,536
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (41,987
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Net (Loss)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (4,894,199
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (3,059,514
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (719,954
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (448,589
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,652,195
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Income (loss) per share:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Basic and fully diluted*
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0229
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0160
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0047
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0022
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0084
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Weighted average common shares outstanding:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Basic and fully diluted*
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    218,268,927
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    197,973,139
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    173,268,048
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    220,268,927
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    200,424,027
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=60 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD valign="top">
    * </TD>
    <TD></TD>
    <TD valign="bottom">
    All outstanding warrants, options, and convertible debt are
    anti-dilutive, therefore basic and diluted earnings per share
    are the same for all periods.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    32
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="44%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Three Months Ended March&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Cash Flow Data</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash flows provided by (used in) operating activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,285,449
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (3,295,900
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    120,053
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (761,919
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (208,047
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash flows (used in) investing activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (549,804
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (316,743
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (479,236
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (60,208
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (164,927
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash flows provided by financing activities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,289,116
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,408,328
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    874,569
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    262,559
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    77,652
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="37%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>As of March&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Balance Sheet Data</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Cash and cash equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    818,719
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    364,856
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    569,171
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    259,151
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    69,534
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Working Capital (deficiency)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,846,289
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    966,658
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    69,766
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,892,747
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (651,720
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total Assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,221,897
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,967,254
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,013,263
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,277,583
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,316,225
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Long-Term Liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,754,379
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,014,476
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,980,476
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,762,408
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,015,453
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accumulated (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (14,687,276
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (9,691,977
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,531,363
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (15,161,140
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (11,369,383
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total Stockholders&#146; equity (deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,089,942
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    423,236
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (603,954
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,223,119
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,190,888
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    33
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='111'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MANAGEMENT&#146;S
    DISCUSSION AND ANALYSIS OF<BR>
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>You should read the following discussion and analysis of
    financial condition and results of operations in conjunction
    with the &#147;Selected Financial and Other Data&#148; and our
    financial statements and related notes appearing elsewhere in
    this prospectus. In addition to historical information, the
    following discussion and analysis includes forward looking
    statements that involve risks, uncertainties and assumptions.
    Our actual results and the timing of events could differ
    materially from those anticipated in these forward looking
    statements as a result of a variety of factors, including those
    discussed in &#147;Risk Factors&#148; and elsewhere in this
    prospectus. See the discussion under &#147;Forward Looking
    Statements&#148; beginning on page&#160;24 of this
    prospectus.</I>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Overview</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are engaged in the design, manufacture, marketing and sale of
    devices that are worn like eyeglasses and feature built-in video
    screens that enable the user to view video and digital content,
    such as movies, computer data, the Internet or video games. Our
    products (known commercially as Video Eyewear, but also commonly
    referred to as virtual displays, wearable displays, personal
    viewers, head mounted displays, or near-to-eye displays) are
    used to view high-resolution video and digital information
    primarily from mobile electronic devices (such as cell phones,
    portable media players, gaming systems and laptop computers) and
    from desktop computers. Our products provide the user a viewing
    experience that simulates viewing a large screen television or a
    desktop computer monitor.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Video Eyewear products feature high performance miniature
    display modules, low power electronics and related optical
    systems. We produce both monocular and binocular Video Eyewear
    devices that we believe are excellent solutions for many mobile
    computer or video viewing requirements. We focus on two markets:
    the consumer markets for gaming and mobile video and rugged
    mobile displays for defense and industrial applications. We also
    offer low-vision assist Video Eyewear products that are designed
    to assist and improve the remaining vision of many people
    suffering from macular degeneration.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Since our inception in 1997, we have derived the majority of our
    sales from fees paid to us under research and development
    contracts and related volume manufacturing services primarily of
    night vision display electronics as a sub-contractor to defense
    suppliers to the US government. Since 2005, we have devoted
    significant resources to the development and commercial launch
    of our industrial and consumer products. During 2008 and 2007,
    we derived 35.4% and 32.4%, respectively, of our sales from our
    consumer Video Eyewear products.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe our intellectual property portfolio gives us a
    leadership position in microdisplay electronics, ergonomics,
    packaging, motion tracking and optical systems.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Critical
    Accounting Policies and Significant Developments and
    Estimates</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The discussion and analysis of our financial condition and
    results of operations are based on our financial statements and
    related notes appearing elsewhere in this prospectus. The
    preparation of these statements in conformity with generally
    accepted accounting principles requires the appropriate
    application of certain accounting policies, many of which
    require us to make estimates and assumptions about future events
    and their impact on amounts reported in our financial
    statements, including the statement of operations, balance
    sheet, cash flow and related notes. Since future events and
    their impact cannot be determined with certainty, the actual
    results will inevitably differ from our estimates. Such
    differences could be material to the financial statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that our application of accounting policies, and the
    estimates inherently required therein, are reasonable. These
    accounting policies and estimates are periodically reevaluated,
    and adjustments are made when facts and circumstances dictate a
    change. Historically, we have found our application of
    accounting policies to be appropriate, and actual results have
    not differed materially from those determined using necessary
    estimates.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our accounting policies are more fully described in the notes to
    our financial statements included in this prospectus. In reading
    our financial statements, you should be aware of the factors and
    trends that our management
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    34
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    believes are important in understanding our financial
    performance. The critical accounting policies, judgments and
    estimates that we believe have the most significant effect on
    our financial statements are:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    valuation of inventories;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    carrying value of long-lived assets;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    valuation of intangible assets;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    revenue recognition;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    product warranty;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    stock-based compensation;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    income taxes.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Valuation
    of Inventories</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Inventory is stated at the lower of cost or market, with cost
    determined on a
    <FONT style="white-space: nowrap">first-in,</FONT>
    first-out method. Inventory includes purchased parts and
    components, work in process and finished goods. Provisions for
    excess, obsolete or slow moving inventory are recorded after
    periodic evaluation of historical sales, current economic
    trends, forecasted sales, estimated product lifecycles and
    estimated inventory levels. Purchasing practices, electronic
    component obsolescence, accuracy of sales and production
    forecasts, introduction of new products, product lifecycles,
    product support and foreign regulations governing hazardous
    materials are the factors that contribute to inventory valuation
    risks. Exposure to inventory valuation risks is managed by
    maintaining safety stocks, minimum purchase lots, managing
    product and end-of-life issues brought on by aging components or
    new product introductions, and by utilizing certain inventory
    minimization strategies such as vendor-managed inventories. The
    accounting estimate related to valuation of inventories is
    considered a &#147;critical accounting estimate&#148; because it
    is susceptible to changes from period-to-period due to the
    requirement for management to make estimates relative to each of
    the underlying factors, ranging from purchasing, to sales, to
    production, to after-sale support. If actual demand, market
    conditions or product lifecycles differ from estimates,
    inventory adjustments to lower market values would result in a
    reduction to the carrying value of inventory, an increase in
    inventory write-offs and a decrease to gross margins.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Carrying
    Value of Long-Lived Assets</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If facts and circumstances indicate that a long-lived asset,
    including a products&#146; mold tooling and equipment, may be
    impaired, the carrying value is reviewed. If this review
    indicates that the carrying value of the asset will not be
    recovered as determined based on projected undiscounted cash
    flows related to the asset over its remaining life, the carrying
    value of the asset is reduced to its estimated fair value. To
    date, no impairment on long-lived assets has been booked.
    Impairment losses in the future will be dependent on a number of
    factors such as general economic trends and major technology
    advances, and thus could be significantly different than
    historical results.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Valuation
    of Intangible Assets</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We perform a valuation of intangible assets when events or
    circumstances indicate their carrying amounts may be
    unrecoverable. We have not impaired the value of certain
    intellectual property, such as patents and trademarks, which
    were valued (net of accumulated amortization) at $710,176 as of
    March&#160;31, 2009, because management believes that its value
    is recoverable.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Revenue
    Recognition</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Revenue from product sales is recognized in accordance with the
    SEC Staff Accounting Bulletin&#160;No.&#160;104, <I>Revenue
    Recognition</I>. Product sales represent the majority of our
    revenue. We recognize revenue from these product sales when
    persuasive evidence of an arrangement exists, delivery has
    occurred or services have been provided, the sale price is fixed
    or determinable, and collectability is reasonably assured.
    Additionally, we sell our products on terms which transfer title
    and risk of loss at a specified location, typically shipping
    point. Accordingly, revenue
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    35
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    recognition from product sales occurs when all factors are met,
    including transfer of title and risk of loss, which typically
    occurs upon shipment by us. If these conditions are not met, we
    will defer the revenue recognition until such time as these
    conditions have been satisfied. We collect and remit sales taxes
    in certain jurisdictions and report revenue net of any
    associated sales taxes. We also sell certain products through
    distributors who are granted limited rights of return for stock
    balancing against purchases made within a prior 90&#160;day
    period, including price adjustments downwards on any existing
    inventory. The provision for product returns and price
    adjustments is assessed for adequacy both at the time of sale
    and at each quarter end and is based on recent historical
    experience and known customer claims.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Revenue from any engineering consulting and other services is
    recognized at the time the services are rendered. For our
    longer-term development contracts, which to date have all been
    firm, fixed-priced contracts, we recognize revenue on the
    percentage-of-completion method. Under this method income is
    recognized as work on contracts progresses, but estimated losses
    on contracts in progress are charged to operations immediately.
    To date, all of our longer-term development contracts have been
    less than one calendar year in duration. We generally submit
    invoices for our work under these contracts on a monthly basis.
    The percentage-of-completion is determined using the
    cost-to-cost method.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The accounting estimate related to revenue recognition is
    considered a &#147;critical accounting estimate&#148; because
    terms of sale can vary, and judgment is exercised in determining
    whether to defer revenue recognition. Such judgments may
    materially affect net sales for any period. Judgment is
    exercised within the parameters of GAAP in determining when
    contractual obligations are met, title and risk of loss are
    transferred, sales price is fixed or determinable and
    collectability is reasonable assured.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Product
    Warranty</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Warranty obligations are generally incurred in connection with
    the sale of our products. The warranty period for these products
    is generally one year, but can be 24&#160;months in certain
    countries if required by law, such as in Europe. Warranty costs
    are accrued, to the extent that they are not recoverable from
    third party manufacturers, for the estimated cost to repair or
    replace products for the balance of the warranty periods. We
    provide for the costs of expected future warranty claims at the
    time of product shipment or over-builds to cover replacements.
    The adequacy of the provision is assessed at each quarter end
    and is based on historical experience of warranty claims and
    costs. The costs incurred to provide for these warranty
    obligations are estimated and recorded as an accrued liability
    at the time of sale. Future warranty costs are estimated based
    on historical performance rates and related costs to repair
    given products. The accounting estimate related to product
    warranty is considered a &#147;critical accounting
    estimate&#148; because judgment is exercised in determining
    future estimated warranty costs. Should actual performance rates
    or repair costs differ from estimates, revision to the estimated
    warranty liability would be required.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Stock-Based
    Compensation</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors approves grants of stock options to
    employees to purchase our common stock. Under
    SFAS&#160;No.&#160;123 (revised 2004), <I>Share-Based
    Payment</I>, stock compensation expense, is recorded based upon
    the estimated fair value of the stock option at the date of
    grant. The accounting estimate related to stock-based
    compensation is considered a &#147;critical accounting
    estimate&#148; because estimates are made in calculating
    compensation expense including expected option lives, forfeiture
    rates and expected volatility. Expected option lives are
    estimated using vesting terms and contractual lives. Expected
    forfeiture rates and volatility are calculated using historical
    information. Actual option lives and forfeiture rates may be
    different from estimates and may result in potential future
    adjustments which would impact the amount of stock-based
    compensation expense recorded in a particular period.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Income
    Taxes</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We account for income taxes in accordance with
    SFAS&#160;No.&#160;109, <I>Accounting for Income Taxes</I>.
    Accordingly, we provide deferred income tax assets and
    liabilities based on the estimated future tax effects of
    differences between the financial and tax bases of assets and
    liabilities based on currently enacted tax laws. A valuation
    allowance is established for deferred tax assets in amounts for
    which realization is not considered more likely than not to
    occur.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    36
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The accounting estimate related to income taxes is considered a
    &#147;critical accounting estimate&#148; because judgment is
    exercised in estimating future taxable income, including prudent
    and feasible tax planning strategies, and in assessing the need
    for any valuation allowance. To date we have determined a 100%
    valuation allowance is required and accordingly no amounts have
    been reflected in our consolidated financial statements. In the
    event that it should be determined that all or part of a
    deferred tax asset in the future is in excess of the nil amount
    currently recorded, an adjustment of the valuation allowance
    would increase income to be recognized in the period such
    determination was made.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, the calculation of our tax liabilities involves
    dealing with uncertainties in the application of complex tax
    regulations. As a result of the implementation of Interpretation
    No.&#160;48, <I>Accounting for Uncertainty in Income Taxes- an
    interpretation of FASB Statement No.&#160;109</I>, we recognize
    liabilities for uncertain tax positions based on the two-step
    process prescribed within the interpretation. The first step is
    to evaluate the tax position for recognition by determining if
    the weight of available evidence indicates that it is more
    likely than not that the position will be sustained on audit,
    including resolution of related appeals or litigation processes,
    if any. The second step requires us to estimate and measure the
    tax benefit as the largest amount that is more than 50% likely
    of being realized upon ultimate settlement. It is inherently
    difficult and subjective to estimate such amounts, as this
    requires us to determine the probability of various possible
    outcomes. We re-evaluate these uncertain tax positions on a
    quarterly basis. This evaluation is based on factors including,
    but not limited to, changes in facts or circumstances, changes
    in tax law, effectively settled issues under audit and new audit
    activity. Such a change in recognition or measurement would
    result in the recognition of a tax benefit or an additional
    charge to the tax provision in the period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Finally, any future recorded value of our deferred tax assets
    will be dependent upon our ability to generate future taxable
    income in the jurisdictions in which we operates. These assets
    consist of research credit carry-forwards, capital and net
    operating loss carry-forwards and the future tax effect of
    temporary differences between balances recorded for financial
    statement purposes and for tax return purposes. It will require
    future pre-tax earnings of in excess of $12.2&#160;million in
    order to fully realize the value of our unrecorded deferred tax
    assets. If we were to sustain future net losses, it may be
    necessary to record valuation allowances against such deferred
    tax assets in order to recognize impairments in their estimated
    future economic value.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Key
    Performance Indicators</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that a key indicator for our business is the trend
    for the volume of orders received from customers, especially
    those orders related to night-vision electronic modules. During
    weak economic periods, customers&#146; ability to forecast their
    requirements deteriorates causing delays in the placement of
    orders. Forward-looking visibility on customer orders is at an
    all time low. Our major night-vision electronics modules
    customers (Kopin and DRS Technologies, Inc.) are placing orders
    for product only when they have orders in hand from their
    governmental customer. Total shipments of night vision
    electronics module customers in 2008 amounted to $6,068,449,
    compared to $1,418,249 in 2007.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Comparison
    of Fiscal Years Ended December&#160;31, 2008 and
    December&#160;31, 2007</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Sales.</I>&#160;&#160;Our sales were $12,564,487 for the year
    ended December&#160;31, 2008 compared to $10,146,379 for the
    year ended December&#160;31, 2007. This represents a 23.8%
    increase for the year 2008 over the year 2007. Our sales from
    defense products increased to $6,471,824 from $1,418,249 in
    2008, an increase of $5,053,575 or 356.3%. The increase resulted
    primarily from new orders of night vision drive electronics from
    prime contractors and the introduction of our
    Tac-Eye<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    display product line in the fourth quarter of 2008. Sales from
    our defense-related engineering programs decreased to $1,548,703
    versus $5,445,376 in 2007. The large decrease was the result of
    the start and completion of a $4.3&#160;million engineering
    program in late 2007. Consumer Video Eyewear product sales
    increased to $4,451,121 for the year ended December&#160;31,
    2008 compared to $3,282,755 for our 2007&#160;year. This 35.6%
    increase resulted from a broader Video Eyewear product line and
    increased distribution in the United&#160;Kingdom and Japan.
    Low-vision assist sales for 2008, consisting mainly of sales of
    low-vision assist products, were $92,839 versus none in fiscal
    2007.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    37
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Cost of Sales and Gross Margin.</I>&#160;&#160;Gross margin
    increased to $3,700,979 for fiscal 2008 from $3,362,906 for
    fiscal 2007, an increase of $338,073 or 10.1%. As a percentage
    of net sales, gross margin decreased to 29.5% for fiscal 2008
    compared to 33.1% for fiscal 2007. This reduction was the result
    of changes in our revenue mix and related margins. Generally, we
    earn a higher gross margin on engineering only programs as
    compared to the gross margin on products, in which we incur cost
    of goods or volume production costs. Engineering services
    revenues decreased to 12.3% as a percentage of total sales in
    2008 versus 53.7% of total sales in 2007, resulting in the
    majority of the reduction in overall gross margin in 2008 versus
    fiscal 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Research and Development.</I>&#160;&#160;Our research and
    development expenses in 2008 increased by $1,001,106, or 42.3%,
    to $3,366,518 in fiscal 2008 versus $2,365,412 in 2007. This was
    due to increased internal development activities and less direct
    support of our research under government funded engineering
    programs. Expenses we incur under government funded engineering
    programs are included in costs of goods sold.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Selling and Marketing.</I>&#160;&#160;Selling and marketing
    expenses were $2,128,625 for fiscal 2008 as compared to
    $1,920,164 for fiscal 2007, an increase of $208,461 or 10.9%.
    Despite the increase in absolute dollars, as a percentage of
    total sales, the selling and marketing expenses decreased to
    16.9% of sales for fiscal 2008 as compared to 18.9% for fiscal
    2007. The absolute dollar increase was primarily due to
    increased advertising expenses along with increased marketing
    support paid out to our expanded consumer products resellers and
    the introduction of in-store point of purchase displays with US
    resellers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>General and Administrative.</I>&#160;&#160;General and
    administrative expenses were $2,299,685 for fiscal 2008 as
    compared to $1,718,627 for fiscal 2007, an increase of $581,058
    or 33.8%. The higher general and administrative related to
    increases in staff and personnel costs, and increased legal
    expenses.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Depreciation and Amortization.</I>&#160;&#160;Our
    depreciation and amortization expense increased by $136,055, or
    36.4%, to $510,133 in 2008 versus $374,078 in 2007. The increase
    was related to increased depreciation on new capital
    expenditures in 2008 and 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Other Income (Expense).</I>&#160;&#160;Total other expenses,
    consisting primarily of interest expense, was $285,005 in 2008
    versus $142,511 for 2007. The increase in expenses was primarily
    attributable to an offsetting legal settlement received during
    2007 in the amount of $96,632.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Provision (Benefit) for Income Taxes.</I>&#160;&#160;The
    provision for income taxes for the year ended December&#160;31,
    2008&#160;was $5,212 versus a net benefit of ($98,372) in 2007.
    The 2007&#160;net benefit includes our accrual of $130,130 in
    New&#160;York State tax credits for our research and development
    activities. The balance of each year&#146;s tax provision was
    primarily for franchise taxes payable to the State of Delaware,
    our state of incorporation. These taxes were $5,212 for 2008 and
    $31,758 for 2007. This decrease was a result of the
    <FONT style="white-space: nowrap">8-for-1</FONT>
    split of our common stock in July 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Net (Loss) and (Loss) per Share.</I>&#160;&#160;Our net loss
    was $(4,894,199) or $(0.0229) per share in 2008, an increased
    loss of $(1,834,685), or (60.0)%, from $(3,059,514) or $(0.0160)
    per share in 2007.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Comparison
    of Fiscal Years Ended December&#160;31, 2007 and
    December&#160;31, 2006</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Sales.</I>&#160;&#160;Our sales were $10,146,379 for the year
    ended December&#160;31, 2007 compared to $9,538,308 for the year
    ended December&#160;31, 2006. This represents a 6.4% increase
    for the year 2007 over the year 2006. Our sales from defense
    products decreased to $1,418,249 from $4,888,243 in 2006, a
    decrease of $3,469,994. The decrease resulted from reduced
    orders from the prime defense contractor caused by technical
    problems in other areas of their supply chain. Sales from our
    defense related engineering programs increased to $5,445,375
    versus $2,627,442 in 2006. This large increase was the result of
    a new $4.3&#160;million government research and development
    program in 2007. Consumer Video Eyewear product sales increased
    to $3,282,755 for the year ended December&#160;31, 2007 compared
    to $2,022,623 for our 2006 fiscal year. This 62.3% increase
    resulted from the introduction of three new Video Eyewear models
    in 2007 and the commencement of our European sales activities in
    late 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Cost of Sales and Gross Margin.</I>&#160;&#160;Gross margin
    decreased to $3,362,906 for fiscal 2007 from $3,770,758 for
    fiscal 2006, a decrease of $407,852 or 10.8%. As a percentage of
    net sales, gross margin decreased to 33.1% for fiscal 2007
    compared to 39.5% for fiscal 2006. This reduction was the result
    of changes in our revenue mix and related margins. Generally, we
    earn a higher gross margin on our defense products as compared
    to the gross margin
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    38
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    on consumer products, and with the introduction of three new
    consumer Video Eyewear products our margins decreased. As
    defense product sales as a percentage of our total sales
    decreased to 14.0% in 2008 versus 51.2% in 2006 our overall
    margins decreased.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Research and Development.</I>&#160;&#160;Our research and
    development expenses in 2007 increased by $1,086,173 or 84.9%,
    to $2,365,412 in fiscal 2007 versus $1,279,239 in 2006. This was
    due to increases in the number of our research and development
    personnel and the lease of additional space dedicated to this
    function.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Selling and Marketing.</I>&#160;&#160;Selling and marketing
    expenses were $1,920,164 for fiscal 2007 as compared to
    $1,191,800 for fiscal 2006, an increase of $728,364 or 61.1%.
    The increase resulted from the preparatory marketing and
    advertising launch expenses by three new consumer Video Eyewear
    products, the establishment of our first print advertising
    programs and increased trade show costs to promote our new Video
    Eyewear products.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>General and Administrative.</I>&#160;&#160;General and
    administrative expenses were $1,718,627 for fiscal 2007 as
    compared to $1,560,278 for fiscal 2006, an increase of $158,349
    or 10.1%. The increase was mainly attributable to increased
    staffing and legal expenses.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Depreciation and Amortization.</I>&#160;&#160;Our
    depreciation and amortization expense increased by $97,089, or
    35.1%, to $374,078 in 2007 versus $276,989 in 2006. The increase
    was related to increased depreciation provisions on new capital
    expenditures in 2007 and full year&#146;s provision on our 2006
    additions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Other Income (Expense).</I>&#160;&#160;Total other expenses,
    consisting primarily of interest expense, was $142,511 in 2007
    versus $178,706 in 2006. Our borrowing costs were $62,673 higher
    in 2007 than in 2006 but our 2007 borrowing costs were offset by
    $96,632 in miscellaneous income related to the settlement of a
    legal dispute.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Provision (Benefit) for Income Taxes.</I>&#160;&#160;The
    provision for income taxes for the year ended December&#160;31,
    2007 was a net benefit of $98,372 versus an expense of $3,700
    for 2006. The 2007 benefit includes our accrual of $130,130 in
    New York State tax credits for our research and development
    activities. The balance of each year&#146;s tax provision was
    primarily attributable to franchise taxes payable to the State
    of Delaware, our state of incorporation. These taxes were
    $31,758 for 2007 and $3,700 for 2006. The large increase was a
    direct result of the
    <FONT style="white-space: nowrap">7-for-1</FONT>
    reverse stock split that took place in 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Net (Loss) and (Loss) per Share.</I>&#160;&#160;Our net loss
    was $(3,059,514) or $(0.0160) per share in 2007, a decrease of
    $(2,339,560) from $(719,954) or $(0.0047) per share in 2006.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Comparison
    of Three Months Ended March&#160;31, 2009 and March&#160;31,
    2008</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Sales.</I>&#160;&#160;Our sales were $3,043,994 for the three
    months ended March&#160;31, 2009 compared to $1,720,914 for the
    three months ended March&#160;31, 2008. This represents a 76.9%
    increase for the 2009 period over the comparable 2008 period.
    Our sales from defense production programs increased to
    $1,479,794 for the 2009 period from $855,601 in the comparable
    2008 period, an increase of $624,194. The increase resulted
    directly from increased orders from our night vision display
    drive electronics customer. Sales from our defense related
    engineering services programs increased to $448,490 for the 2009
    period versus $57,039 in the comparable 2008 period. Engineering
    services were unusually slow in 2008 as we were in transition
    between programs. Consumer Video Eyewear product sales increased
    to $1,101,186 for the three months year ended March&#160;31,
    2009 compared to $808,274 for the same period in 2008. This
    36.2% increase resulted mainly from our increased distribution
    in the United Kingdom and Japan as compared to 2008. Low-vision
    assist sales for the three months ended March&#160;31, 2009 were
    $14,523. There were no such sales for the same period in 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Cost of Sales and Gross Margin.</I>&#160;&#160;Gross margin
    increased to $1,187,311 for the three-month ended March&#160;31,
    2009 from $233,565 for three months ended March&#160;31, 2008,
    an increase of $953,746 or 408.3%. As a percentage of net sales,
    gross margin increased to 39.0% for 2009 period compared to
    13.6% for the comparable 2008 period. Gross margins for the 2008
    period were lower than for the similar period in 2009 due to
    product clearance activities, when an older product model was
    being phased out and larger reseller discounts were being
    offered to assist its sales. Additionally, changes in our
    revenue mix and their related margins improved margins for the
    2009 period. Generally, we earn a higher gross margin on
    engineering services and our defense product sales as compared
    to the gross margin on products and they were 63% of total
    revenues in 2009 versus 53% for the same period in 2008.
</DIV>

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    <BR>
    39
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Research and Development.</I>&#160;&#160;Our research and
    development expenses in the three months ended March&#160;31,
    2009 were $502,011 versus $736,716 in the comparable 2008
    period, a decrease of $234,705 or 31.9%. This was due to staff
    reductions made in late 2008 and a decreased use of external
    contractors in the 2009 period versus 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Selling and Marketing.</I>&#160;&#160;Selling and marketing
    expenses were $449,266 for the three months ended March&#160;31,
    2009 as compared to $449,562 for the comparable 2008 period, a
    small decrease of just $296. As a percentage of total sales, the
    selling and marketing expenses decreased to 14.8% of sales for
    the three month period in 2009 as compared to 26.1% for same
    period in fiscal 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>General and Administrative.</I>&#160;&#160;General and
    administrative expenses were $478,253 for the three months ended
    March&#160;31, 2009 as compared to $533,799 for the comparable
    2008 period, a decrease of $55,546 or 10.4%. The lower general
    and administrative related to decreases in staff and personnel
    costs for the 2009 period against the 2008 period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Depreciation and Amortization.</I>&#160;&#160;Our
    depreciation and amortization expense increased by $15,138, or
    12.2%, to $138,834 in the three months ended March&#160;31, 2009
    versus $123,696 in the comparable 2008 period. The increase was
    related to increased depreciation provisions on new capital
    expenditures made later in fiscal 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Other Income (Expense).</I>&#160;&#160;Interest expense, net
    of interest income and foreign exchange adjustments, was $66,648
    in the three months ended March&#160;31, 2009 versus $41,234 for
    the comparable 2008 period. The increase represents increased
    borrowings and higher interest rates on a note payable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Provision (Benefit) for Income Taxes.</I>&#160;&#160;The
    provision for income taxes was for franchise taxes to Delaware,
    our state of incorporation. Such income taxes for the three
    months ended March&#160;31, 2009 were $888 and $753 for the
    comparable 2008 period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Net (Loss) and (Loss) per Share.</I>&#160;&#160;Our net loss
    was $(448,589) (or $(0.0022) per share) in the three months
    ended March&#160;31, 2009, an improvement of $1,203,606, or
    72.8%, from the larger loss of $(1,652,195) or $(0.0084) per
    share in the comparable 2008 period.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Liquidity
    and Capital Resources</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of March&#160;31, 2009, we had cash and cash equivalents of
    $259,151, a reduction of $559,568 from $818,719 as of
    December&#160;31, 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our cash requirements are primarily for research and
    development, product tooling, and working capital. Historically,
    we have met these requirements through capital generated from
    the sale and issuance of our common equity securities,
    convertible debt and notes payable to private investors, cash
    flow provided by operations and our revolving bank lines of
    credit.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Operating Activities.</I>&#160;&#160;Cash (used in) operating
    activities was $(1,285,449) in fiscal 2008 and $(3,295,900) in
    fiscal 2007. Changes in operating assets and liabilities,
    excluding cash, provided (used) cash were $2,785,425 in fiscal
    2008 and $(800,177) in fiscal 2007. The decreases in our
    accounts receivable by December&#160;31, 2008 of $1,494,613
    along with a $733,691 increase in accounts payable and customer
    deposits of $683,040 primarily resulted in this cash flow
    improvement in 2008 over 2007. Cash (used in) operating
    activities was $(761,919) and $(208,047) for the three-month
    periods ended March&#160;31, 2009 and 2008, respectively.
    Changes in operating assets and liabilities, excluding cash,
    provided (used) cash were $(492,853) and $1,273,868 for the
    three-month periods ended March&#160;31, 2009 and 2008,
    respectively. The 2009 period&#146;s use resulted mainly from
    decreases in accounts payable and customer deposits whereas the
    provision of cash for the same period in 2008 resulted primarily
    from a decrease in accounts receivable in the three-month
    periods.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Investing Activities.</I>&#160;&#160;Cash used in investing
    activities was $549,804 in fiscal 2008 and $316,743 in fiscal
    2007 and $60,208 and $164,927 for the three-month periods ended
    March&#160;31, 2009 and 2008, respectively. Cash used for
    investing activities in fiscal 2008 related primarily to
    production tooling and computer software equipment additions of
    $424,166 and in the three-month period ended March&#160;31, 2009
    related primarily to tooling acquisitions of $19,369. The costs
    of registering our intellectual property rights, including in
    the investing activities described
</DIV>

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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    above were $125,638 in fiscal 2008 and $136,433 in fiscal 2007
    and $40,839 and $42,547 for the three-month periods ended
    March&#160;31, 2009 and 2008, respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Financing Activities.</I>&#160;&#160;Cash provided by
    financing activities was $2,289,116 in fiscal 2008 and
    $3,408,328 in fiscal 2007 and $262,559 and $77,652 for the
    three-month periods ended March&#160;31, 2009 and 2008,
    respectively. We sold shares of our common stock for aggregate
    gross proceeds of $2,138,646 in 2008 and $3,792,362 in 2007 and
    $300,000 in the three-month period ended March&#160;31, 2009 in
    private placements offerings. In the three-month period ended
    March&#160;31, 2008 we sold shares of our common stock for
    aggregate gross proceeds of $16,697 upon exercise of stock
    options.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Capital Resources.</I>&#160;&#160;As of December&#160;31,
    2008, we had a cash balance of $818,719. We had $10,210 in
    available bank lines of credit (total drawings as of
    December&#160;31, 2008 were $202,290). As of March&#160;31,
    2009, we had a cash balance of $259,151. We had $12,733 in
    available bank lines of credit (total drawings as of
    March&#160;31, 2009 were $199,767). The credit lines are with
    two banks, are payable on demand and secured by the personal
    guarantee of our President and Chief Executive Officer, Paul J.
    Travers. The bank credit agreements contain various restrictions
    on indebtedness, liens, guarantees, redemptions, mergers,
    acquisitions or sale of assets, loans, transactions with any
    affiliates, and investments. They also prohibit us from
    declaring dividends without the bank&#146;s prior consent.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our cash requirements depend on numerous factors, including new
    product development activities, our ability to commercialize our
    products, their timely market acceptance, selling prices and
    gross margins, and other factors. We expect to carefully devote
    capital resources to continue our development programs, hire and
    train additional staff, expand our research and development
    activities, new product marketing and increased inventory
    levels. Assuming we are able to continue to increase our sales
    and maintain our planned gross margins, we anticipate that we
    will also experience growth in our operating expenses for the
    foreseeable future. Our net operating income or loss, product
    tooling expenses, and related working capital investments will
    be the principal use of our cash. In particular, we expect that
    potentially significant amounts of working capital investments
    in accounts receivable and inventories that are not offset by
    corresponding increases in accounts payable will use cash with
    our planned growth.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We anticipate, based on our internal forecast and assumptions
    relating to our operations (including, among others, assumptions
    regarding our working capital requirements, the progress of our
    research and development efforts and Video Eyewear product sales
    and gross margins) that, taking into account the anticipated
    proceeds of the sale of our securities pursuant to this
    prospectus, we will have sufficient cash to meet our working
    capital and other cash flow requirements for at least the next
    12&#160;months.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The recent global economic crisis has caused disruptions and
    extreme volatility in global financial markets, increased rates
    of default and bankruptcy, and has impacted consumer spending
    levels. These macroeconomic developments could adversely affect
    our business, operating results or financial condition. Current
    or potential customers, including suppliers to the US
    government, may delay or decrease spending on our products and
    services as their business
    <FONT style="white-space: nowrap">and/or</FONT>
    budgets are impacted by economic conditions. The inability of
    current
    <FONT style="white-space: nowrap">and/or</FONT>
    potential customers to pay us for our products and services may
    adversely affect our earnings and cash flows.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Current
    Financial Position</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date of this prospectus we had approximately $363,478
    in cash and cash equivalents.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In May 2009, we were awarded an indefinite delivery/indefinite
    quantity (IDIQ) contract to deliver our
    <FONT style="white-space: nowrap">Tac-Eye</FONT>
    LT<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    display system to the Air Force&#146;s Battlefield Airman
    Program. The system has been developed over the last five years
    with support from various US military commands including the Air
    Force Research Laboratory, Natick Soldier Center and US Special
    Operations Command (USSOCOM). If the Air Force exercises all of
    its options under the contract, our revenues under the contract
    could equal $2&#160;million over the next 19&#160;months.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In October 2008, we received approval of a $640,000 government
    engineering program. We anticipate that the contract relating to
    this award will be executed and our work on the program will
    commence during 2009. We expect the program to be completed in
    nine months.
</DIV>

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    <BR>
    41
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date of this prospectus we had approximately
    $2,728,000 in purchase orders for our defense-related, night
    vision drive electronics. Those purchase orders are generally
    non-cancelable. Work on those purchase orders is expected to
    commence in September 2009. Backorders for our Video Eyewear
    products as of the date of this prospectus were less than
    $78,300, which is normal for this time of the year for our
    consumer product sales. Since March&#160;31, 2009, our inventory
    and accounts payable have not changed materially but we expect
    them to increase further during the remainder of 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that the anticipated additional growth in sales from
    sales of our Video Eyewear should contribute to revenue growth
    for the remainder of 2009 and beyond. We believe that sales from
    our defense programs should also contribute to revenue growth
    for the remainder of 2009 and beyond. We anticipate that we will
    continue to experience increases in our sales and marketing, and
    general operating expenses throughout the remainder of 2009 and
    in 2010 but that they should not grow as a percentage of overall
    sales.
</DIV>

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    <BR>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='112'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">BUSINESS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Company
    Overview</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are engaged in the design, manufacture, marketing and sale of
    devices that are worn like eyeglasses and feature built-in video
    screens that enable the user to view video and digital content,
    such as movies, computer data, the Internet or video games. Our
    products (known commercially as Video Eyewear but also commonly
    referred to as virtual displays, wearable displays, personal
    viewers, head mounted displays, or near-to-eye displays) are
    used to view high-resolution video and digital information from
    mobile electronic devices, such as cell phones, portable media
    players, gaming systems and laptop computers. Our products
    provide the user with a viewing experience that simulates
    viewing a large screen television or a desktop computer monitor
    that can be viewed practically anywhere, anytime.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Video Eyewear products feature high performance miniature
    display modules, low power electronics and related optical
    systems. We produce both monocular and binocular Video Eyewear
    devices that we believe are excellent solutions for uses
    including many mobile computer, mobile internet devices
    (MID)&#160;or video viewing requirements, including general
    entertainment applications. We focus on two markets: the
    consumer markets for gaming and mobile video and rugged mobile
    displays for defense and industrial applications. We also offer
    low-vision assist Video Eyewear products that are designed to
    assist and improve the remaining vision of many people suffering
    from macular degeneration.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Owners of mobile display devices increasingly want to use them
    to view high-resolution, full color content. The displays
    currently used in these mobile devices do not work well for this
    purpose because they are either too small, which makes it
    extremely difficult for the human eye to view the detail of the
    images that they display, or they are too large, making the
    device heavier, larger and difficult to carry. Recently, some
    mobile devices, like the iPhone, have employed a touch screen
    with software capable of magnifying or zooming in on a small
    portion of the image. We believe that many consumers consider
    this solution unsatisfactory because it is not like their
    desktop computer viewing experience and they find it difficult
    to navigate touch screens and to find information on the portion
    of the image being viewed.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In contrast, our Video Eyewear products enable users of many
    mobile devices to effectively view the entire screen on a small,
    eyeglass-like device. They can be used as a wearable replacement
    for any television or desktop computer monitor in almost any
    environment. Our products employ microdisplays that are smaller
    than one-inch diagonally, with some as small as one-quarter of
    an inch. They can display an entire, detailed image with
    resolution of up to 1280&#215;720 pixels (High Definition or
    HD). The images on the microdisplay are viewed through
    proprietary magnifying optics that are usually designed by us
    and incorporated into our Video Eyewear products. Using these
    optics and displays, our Video Eyewear products provide a
    virtual image that appears to be similar to the image on a full
    size computer screen from a normal desktop working distance or
    the image on a large flat panel television from normal home TV
    viewing distance. For example, when magnified through our
    optics, a high-resolution 0.44-inch diagonal microdisplay can
    provide a viewing experience comparable to that on a
    <FONT style="white-space: nowrap">62-inch</FONT>
    diagonal television screen viewed at nine feet.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Overall
    Strategy</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our goal is to establish and maintain a leadership position as a
    worldwide supplier of Video Eyewear and virtual imaging
    technology solutions. We intend to offer our technologies across
    major markets, platforms and applications. We will strive to be
    an innovator in designing virtual display devices that enable
    new mobile video viewing and general entertainment applications.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To maintain and enhance our position as a leading provider of
    virtual display solutions, we intend to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    improve brand name recognition;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    provide excellent products and service;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    develop products for large markets;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    broaden and develop strategic relationships and partnerships;
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    43
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    promote and enhance development of third party software that can
    take advantage of our products;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    expand market awareness for Video Eyewear, including use for
    Virtual Reality and Augmented Reality;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    obtain and maintain market leadership and expand customer base;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    maintain and exploit cost advantage;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    extend our proprietary technology leadership;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    enhance and protect our intellectual property portfolio;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    establish multiple revenue sources;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    continue to invest in highly qualified personnel;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    build and maintain strong design capabilities;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    leverage our outsourcing model.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">The
    Market</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that there is growing demand for mobile access to
    high-resolution content in several major markets. Our business
    focuses on the consumer mobile entertainment and gaming markets
    and the industrial and defense markets. The demand for personal
    displays in these markets is being driven by such factors as:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Increasing use of the Internet in all aspects of society and
    business, which is increasing demand for Internet access
    &#147;anywhere, anytime&#148;.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Low cost wireless networks, with significantly increased
    bandwidths and improved compression of digital media, continue
    to evolve. They now allow users to view television or access the
    Internet on mobile devices. However, the relatively lower
    resolution and larger size of the displays currently used in
    these mobile devices do not allow the users to take full
    advantage of the high-resolution content available to them. We
    believe that our Video Eyewear products are well suited for this
    purpose.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Increased spending by consumers on mobile entertainment devices
    such as iPods and cellular telephones. We expect that
    full-featured, cellular handsets with video capabilities will
    become more widely available and that a single handset will
    replace today&#146;s separate telephone, PDA, digital camera,
    handheld game player and MP3 music player. Our Video Eyewear
    products can provide viewable high-resolution mobile displays
    for users of these merged devices, with better viewing
    capability and higher detailed resolution than the small screens
    on existing mobile devices.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Industrial, defense and security sectors are employing mobile
    communications, sensors and surveillance devices that are light,
    durable and easy to use but require displaying their
    high-resolution content on an external device and often in a
    hands-free way. Our wearable Video Eyewear products can be ideal
    for this and will allow a user their physical mobility.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Video gaming on PCs and consoles continues to grow in North
    America and around the world. We believe that our Virtual
    Display technologies will significantly increase user
    satisfaction with gaming applications by engaging the user
    through the use of stereoscopic imagery and interactive head
    tracking. Our Virtual Reality and Augmented Reality Video
    Eyewear are designed to provide this capability.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    The widening distribution of new three dimensional (3D) movies
    and other 3D content in North America is creating a need for a
    method to play this content outside movie theaters. We believe
    that Video Eyewear, with its inherent dual display design, is
    well suited for the playback of 3D content. Stereoscopic 3D
    video playback on Video Eyewear also avoids many of the negative
    issues commonly encountered by shutter, polarized or color
    anaglyph glasses used in competing technologies and allows the
    user to view 3D content without purchasing new computer or
    television equipment.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    People with low-vision problems require devices to magnify and
    capture images that they wish to see and to display them in a
    manner that they can view with their remaining vision. Our Video
    Eyewear, with the
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    44
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>
</TD>
    <TD align="left">
    addition of a camera and digital signal processing in a single
    device, can provide this capability to many people suffering
    from certain types of vision problems.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Target
    Markets</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our target markets and applications by major sector are:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Consumer</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><U>Entertainment and Internet</U>.&#160;&#160;</I>We believe
    that there is an increasing demand for convenient,
    high-resolution, 3D displays to view content such as movies,
    entertainment and the Internet in a mobile environment.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><U>Gaming.</U>&#160;&#160;</I>We believe that there is a need
    for high-resolution, interactive, stereoscopic 3D display
    devices for use with desktop computers, consoles and other
    gaming products. We believe that gaming on modern mobile devices
    with small, direct view screen is not a satisfactory experience
    for many consumers. Our Video Eyewear products are designed to
    significantly enhance a consumer&#146;s experience by providing
    larger, high-resolution images with stereoscopic 3D
    capabilities. We believe that there is also a demand for display
    devices that enable the user to simulate and experience movement
    within a three-dimensional environment when using either gaming
    consoles or mobile devices. We anticipate that Virtual Reality
    (VR) (which allows a user to interact with a computer-simulated
    environment, whether that environment is a simulation of the
    real world or an imaginary world) and Augmented Reality (AR)
    (which combines real-world and computer-generated data in real
    time) will become increasingly popular entertainment
    applications. Both VR and AR are difficult to implement using
    traditional desktop computer monitors and televisions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Industrial
    and Defense</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The US government requires display devices for mobile and
    hands-free viewing of computer and mapping information, remote
    viewing of sensor data, and remote viewing of transmissions from
    targeting systems. These applications currently include:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Night vision and thermal sighting systems;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Unmanned vehicle and robotic systems;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Training and simulation systems, including AR Video Eyewear.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    These systems typically are required to provide detailed,
    high-resolution images, with limited power consumption and low
    external light emission, and to be durable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Video Eyewear products are also used for a number of
    industrial applications, including as remote camera displays and
    wearable computer displays, for viewing of industrial thermal
    signature systems and for providing hands-free access to manuals
    and other required information in remote and in-field
    maintenance servicing.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Low-vision
    Assist</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that our Video Eyewear products may provide solutions
    for patients suffering from certain types of visual handicaps.
    Our low-vision assist products are designed to assist patients
    suffering from macular degeneration by signal processing and
    re-focusing an integrated camera image into the areas of the
    retina that are not affected by the patient&#146;s macular
    degeneration.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the United States, macular degeneration in older people is
    the leading cause of loss of sight. As an indication of the size
    of the low-vision assist market, according to US National Eye
    Institute, there are currently over 1.8&#160;million Americans
    suffering from some form of degenerative low-vision disease with
    an additional 200,000 being diagnosed annually.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    45
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Products</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe we provide the broadest range of consumer Video
    Eyewear product offerings available in the market and that our
    products contain the most advanced electronics and optics for
    their target markets and uses. Our products include:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Binocular
    Video Eyewear Products</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The features of our binocular Video Eyewear products, including
    their resolution and apparent display size, microphones,
    tracking devices and support of three-dimensional viewing are
    designed to suit consumer applications. Our binocular Video
    Eyewear products contain two microdisplays, a separate display
    for each eye, typically mounted in a frame attached to eyeglass
    style-temples. These products enable mobile and hands-free
    private viewing of video content on screens that simulate home
    theater-sized screens. Headphones are built into the temples so
    that users can listen to accompanying audio in full stereo. They
    can be employed as mobile high-resolution displays with products
    such as portable DVD players, laptop computers, MIDs, cellular
    phones with video output capability, and personal digital
    media/video players (video iPods).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For the consumer markets, we currently produce four binocular
    Video Eyewear products, all of which support 3D applications.
    Each has a different apparent display size and native
    resolution. They are:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    AV230 XL&#160;&#151; QVGA (320x240 three-color pixels)
    resolution and simulating a
    <FONT style="white-space: nowrap">44-inch</FONT>
    screen at nine feet.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    AV310 widescreen&#160;&#151; WQVGA (420x240 three-color pixels)
    resolution and simulating a
    <FONT style="white-space: nowrap">52-inch</FONT>
    screen at nine feet.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    AV920&#160;&#151; VGA (640x480 three-color pixels) resolution
    and simulating a
    <FONT style="white-space: nowrap">62-inch</FONT>
    screen at nine feet.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    VR920&#160;&#151; VGA (640x480 three-color pixels) resolution,
    simulating a
    <FONT style="white-space: nowrap">62-inch</FONT>
    screen at nine feet, designed to plug into a computer&#146;s USB
    and video ports, and containing our proprietary three degrees of
    freedom head tracking technology, which enables the user to look
    around the environment being displayed by simply moving his or
    her head. A microphone allows the user to communicate with
    others. We expect those features to be of particular interest to
    users playing games using the VR920, but they also can be used
    in commercial 3D applications and for exploring Internet virtual
    worlds like Second Life. The VR920 is currently compatible with
    over 80 titles that work with it out of the box, including
    popular games such as Microsoft&#146;s Flight Simulator X and
    World of Warcraft. We currently have over 1000 software
    developers&#146; kits being used in applications from college
    research programs to commercial developers to develop additional
    titles for the VR920. With the addition of a clip-on camera
    which we are currently tooling the VR920 can also used in AR
    applications.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We sell our current binocular products into the consumer
    marketplace under the brand
    iWear<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>.

    At the Consumer Electronics show in January 2009 we introduced
    our first sunglass styled Video Eyewear product that we will be
    selling under the
    Wrap<SUP style="font-size: 85%; vertical-align: top"><FONT style="font-variant: SMALL-CAPS">tm</FONT></SUP>

    brand. We plan to introduce two versions of our Wrap optics,
    including one that will both allow the user to see through to
    the real world when the display is off or be just partially
    transparent when the display is on. The first version will not
    be see-through and we expect it will be introduced by October
    2009. We anticipate that by spring 2010 we will be offering a
    second version with see-through optics and a higher display
    native resolution that will accept HD inputs and support AR
    applications and at the same time be backwards compatible to all
    the VR920 gaming applications already written. We also
    anticipate that by spring 2010 we will be offering our six
    degrees of freedom tracking technology, which is currently still
    in development. That technology is being designed to both
    accurately track an object&#146;s and the user&#146;s position
    in 3D virtual space and to combine that tracking capability with
    translational information about the three rotational axes (roll,
    yaw, pitch). The addition of this translational information will
    allow the device to report information about its X, Y and Z
    position as it moves. This will expand the realism and accuracy
    for users interacting in a VR or AR environment. We anticipate
    that our six degrees of freedom tracking technology will be
    available both separately as an accessory and as a built-in
    feature of many of our Video Eyewear products.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We anticipate that future generations of our Video Eyewear
    products will have form factors that should be even more
    appealing to consumers, with appearances and sizes that are more
    like ordinary sunglasses, and be more
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    46
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    ergonomic and fashionable. We intend to sell our binocular
    products into the defense markets and have developed and
    delivered prototypes of a rugged version for marine
    applications. We also intend to sell our binocular products for
    industrial applications that are similar to those in the defense
    markets and with our new
    Wrap<SUP style="font-size: 85%; vertical-align: top"><FONT style="font-variant: SMALL-CAPS">tm</FONT></SUP>

    line of Video Eyewear we anticipate advanced applications from
    training and tools for maintenance and repair to interactive
    product design and development.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Monocular
    Video Eyewear Products</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our
    Tac-Eye<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    monocular (single eye) high-resolution Video Eyewear models are
    designed to clip onto a pair of ballistic sunglasses, a head set
    or conventional safety goggles. They can be used with the large
    installed base of rugged laptops, security and night vision
    cameras and thermal night vision sights, including those systems
    that we currently act as a sub-contractor of display drive
    electronics to the US defense department.
    Tac-Eye<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    enables users to have wearable, private and hands-free access to
    high-resolution content or information. They enable the viewing
    of material that is difficult or impossible to accurately view
    on the lower-resolution direct view screens that are standard on
    many of these devices without extensive zooming in or panning
    across the screen.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Most of our
    Tac-Eye<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    products have an SVGA display and afford a 28 degree field of
    view, the equivalent of a
    <FONT style="white-space: nowrap">20-inch</FONT>
    computer screen at three feet. They are also designed to be
    durable and suitable for defense field use and industrial
    applications.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Defense
    Sub-Assembly and Custom Solutions</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are involved in two programs as part of contracting teams
    that produce display drive electronic subassemblies for light,
    medium, and heavy weight thermal weapon systems for US and other
    defense forces. We produce the display drive electronics as part
    of these night-vision systems and over the last five years we
    have delivered over 107,000 systems. These products have
    accounted for over 50% of our sales in the last two years.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also have provided full optics systems, including head
    mounted devices, wrist worn displays, human computer interface
    devices, and wearable computers as prototypes under several
    armed services test programs. These are being tested in
    applications such as the remote control of unmanned vehicles.
    When possible, we obtain a first right of refusal to be the
    volume manufacturer of our proprietary display subassemblies as
    part of our contracting process for the custom design of
    products.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Low-vision
    Assist Products</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We offer two Video Eyewear products specifically for low-vision
    assist applications. The first is a bundle of our AV920 Video
    Eyewear with an external handheld camera that magnifies written
    information to help a user to read small print. The second
    consists of binocular Video Eyewear that incorporates a camera
    and digital signal processor that uses our proprietary digital
    signal processing algorithms to increase contrast,
    magnification, color correction, edge detection, histogram
    flattening, and using other video processing techniques. The
    image received by the camera is processed, enhanced and
    transmitted to the displays within the Video Eyewear to be
    viewed by a user suffering from macular degeneration. These
    devices are designed to permit many users suffering from macular
    degeneration to perform a number of normal daily functions, such
    as reading or signing a check, that they could not perform
    unaided.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Technology</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that it is important to make substantial investments
    in research and development to maintain our competitive
    advantage. The development and procurement of intellectual
    property rights relating to our technologies is a key aspect of
    our business strategy. Near-to-eye virtual displays and their
    components use relatively new technologies. We believe that it
    is technologically feasible to improve the weight, ergonomics,
    optical performance, luminance, power efficiency, design
    compactness, field of view and resolution of the current
    generation of virtual displays and display components. We expect
    to continue to improve our products through our ongoing research
    and development and advancements made by our third party
    suppliers of key components. We also develop intellectual
    property through our ongoing performance under engineering
    service contracts for the US Government. During our fiscal years
    ended December&#160;31, 2008, December&#160;31, 2007 and
    December&#160;31, 2006, we spent $3,366,518,
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    47
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    $2,365,412 and $1,279,239, respectively, on research and
    development activities. We expect to continue to increase our
    research and development expenditures in the future. We have
    also acquired technologies developed by third parties and we may
    do so in the future.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that the range of our proprietary technologies gives
    us a significant competitive advantage. Our technologies include
    motion tracking systems; stereoscopic display assemblies; optic
    systems; display backlights; mobile and wearable computing
    devices and user interface technology; low-power electronics;
    software drivers; and software applications. Our technologies
    enable us to provide low-cost, small form factor,
    high-resolution Video Eyewear products. To protect our
    technologies, we have developed a patent portfolio which
    consists of:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    44 total patents issued worldwide;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    27 US patents issued (12 non-provisional, 15 design);
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    11 US patents pending (3 design, 7 non-provisional, 1
    provisional);
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    17 international (non-US) patents issued (15 design, 2
    non-provisional);
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    10 international (non-US) patents pending (3 design, 5
    non-provisional, 2 applications under the Patent Cooperation
    Treaty);&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    5 applications in preparation but not yet filed, covering our
    virtual display technology.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our US patents expire on various dates from May&#160;7, 2010
    until September&#160;23, 2024. Our international patents expire
    on various dates from May&#160;30, 2015 until May&#160;30, 2030.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Major technologies that we employ in our products include:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Hardware
    Technology</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><U><FONT style="font-family: 'Times New Roman', Times">Virtual
    Display Technology (including Lens Technology and Optics
    Assemblies)</FONT></U></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Microdisplay optics represents a significant cost of goods for
    both us and our competitors. Driving this cost is the
    significant trade off between the physical size of the
    microdisplay and the cost of the supporting optics. Smaller
    displays require larger and more sophisticated optics, while
    larger displays require less magnification and less complex
    optics. The smaller a microdisplay is, the less it costs to
    produce. But the smaller a microdisplay is, the more difficult
    it is to make optics systems that have no user adjustments,
    large fields of view and very low distortion specifications. To
    improve our Video Eyewear&#146;s fashion and ergonomics we are
    developing thin and lightweight optics that can be integrated
    with display engines that match conventional eyewear frames in
    size and weight and provide what we believe are significantly
    improved ergonomics compared to competing wearable virtual
    displays.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Vuzix Quantum Optic:</I>&#160;&#160;We believe we have
    developed revolutionary &#147;first surface&#148; optics
    assemblies that include lenses, microdisplays, and backlights,
    all assembled into a single sub-assembly. This technology
    permits the production of inexpensive microdisplay engines that
    provide low-distortion and large field of view images. We expect
    that this technology will also enable us to produce
    sunglass-styled Video Eyewear products that will allow the user
    to see through the display to the real world. We expect to
    introduce the first of these products in the fourth quarter of
    2009 under the
    Wrap<SUP style="font-size: 85%; vertical-align: top"><FONT style="font-variant: SMALL-CAPS">tm</FONT></SUP>

    brand. We have both issued and pending patents with respect to
    this technology.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Vuzix Blade Optic:</I>&#160;&#160;We are developing an
    optical display engine that uses a blade of glass or plastic as
    a wave guide, which we refer to as the
    Blade<SUP style="font-size: 85%; vertical-align: top"><FONT style="font-variant: SMALL-CAPS">tm</FONT></SUP>.

    The Blade uses a &#147;projected&#148; image from a conventional
    microdisplay that is &#147;squeezed&#148; into a thin blade of
    glass or plastic and, using a proprietary light guide expander,
    the image exits from the glass in front of the user&#146;s eye.
    We expect this display engine will provide a large field of view
    from a very thin lens system. The Blade can also function in
    see-through applications. Unlike competing wearable virtual
    displays, a see-through display does not obstruct the
    wearer&#146;s vision or reduce his awareness of what is
    happening around him. Video Eyewear employing this display
    engine will be closer to conventional sunglasses than currently
    available products in comfort, size, weight and ergonomics. We
    have filed patent applications with respect to this technology.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Holographic Display Engine:</I>&#160;&#160;We have numerous
    patents and patents pending on our new Holographic Display
    Engine (HSE). The HSE incorporates both a display subsystem and
    associated optics in a single monolithic design. The image is
    projected into the edge of a slim piece of glass where it is
    internally reflected and directed out
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    48
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    through a holographic element where it appears as a large
    virtual screen to the user. To date we have successfully
    prototyped a monochrome version of this display engine in our
    design lab. If our continued research is successful we believe
    we should ultimately have a low cost very high-resolution
    display engine that by price, resolution, weight, form factor
    and power consumption all should far exceed existing
    microdisplay technology.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Low Power&#160;&#151; LCD Drive
    Electronics:</I>&#160;&#160;We believe that our numerous
    successful designs for the defense market demonstrate that we
    can design and successfully implement very low-power
    microdisplay electronics modules. The electronics required to
    drive advanced microdisplays are a complex and costly piece of a
    virtual display system. We may develop application-specific
    integrated circuits (ASICs) to further reduce the cost, number
    of components, and size of our electronics package while
    improving the performance with various input sources. While
    costly and complicated to develop, we believe these ASICs could
    be critical to the success of our cost reduction programs and,
    once completed, should also create barriers to entry for
    competitors.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Position Tracking:</I>&#160;&#160;Our tracking system
    incorporates patented, multi-axis, &#147;source-less&#148;
    tracking technology to track the rotational orientation of the
    user&#146;s head. Using the earth&#146;s magnetic field and
    gravity as references, a silicon sensor supplies the yaw
    information and a silicon-based tilt sensor supplies pitch and
    roll, as well as error correction. We have significantly reduced
    the cost of tracking with our patented technology as compared to
    competitive alternative solutions available today. We have also
    begun development on our 6 degrees of freedom tracker that adds
    translational tracking about the three rotational axes (roll,
    yaw, pitch). We believe that cost-effective tracking technology
    is fundamental to any Virtual and Augmented Reality Video
    Eyewear system&#146;s success and will help create a significant
    barrier to entry for the competition.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><U><FONT style="font-family: 'Times New Roman', Times">3D
    Content Delivery</FONT></U></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Vuzix Automated 3D Watermark:</I>&#160;&#160;In response to
    the proliferation of large-screen, HD home entertainment
    systems, the motion picture industry has recently begun to
    invest in stereoscopic 3D technologies to attract theater
    viewers. Over 5,000 North American movie theaters are being
    converted to both digital projection and full 3D and production
    of 3D motion pictures is increasing. Video Eyewear, with its
    immersive environment and two separate displays, is well suited
    for viewing 3D content and avoids many of the negative issues
    typically encountered by shutter, polarized or color anaglyph
    glasses used in competing technologies such as video color
    distortion, noticeable flicker, decreased contrast and
    bleed-through. Currently, in order to effectively display 3D
    content, the viewer must manually switch the projection system
    or display device to 3D mode as required by the content. We have
    developed and have patents pending on a system that does this
    automatically for the viewer. Using our system, a
    &#147;watermark&#148; is embedded into the video stream that
    identifies it as being 3D content. Our Video Eyewear can decode
    the watermark and reconfigure the Video Eyewear to view the
    content in 3D without any involvement by the viewer. If the
    content is not in 3D, the Video Eyewear remains functioning in
    two-dimensional mode. Our technology can be used with both
    legacy and advanced Digital Rights Managed (DRM) delivery
    systems.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Vuzix 3D Stereoscopic USB Drivers:</I>&#160;&#160;We have
    developed a USB driver that will allow most 3D titles to work in
    3D stereoscopic mode with our PC based Video Eyewear. This
    driver allows 3D titles that have been and are being created
    utilizing Microsoft&#146;s Direct X 3D graphics drivers and Open
    GL, industry standards for entertainment and other 3D graphic
    applications, to be viewed in stereoscopic 3D using our Video
    Eyewear. We release support for the 3D titles using
    &#147;Monitor Software&#148; on a
    <FONT style="white-space: nowrap">title-by-title</FONT>
    basis, typically coincident with added tracking capabilities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><U><FONT style="font-family: 'Times New Roman', Times">General
    Eyewear Technology</FONT></U></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Vuzix Ergonomics and Industrial Designs:</I>&#160;&#160;We
    have developed ergonomic technologies that make head-worn
    displays easier to use in a wide variety of applications. For
    example, we are currently one of the only producers of Video
    Eyewear solutions that offers focus adjustment on our products
    that accommodate many of our users that need glasses for vision
    correction and at the same time we offer the ability to
    accommodate glasses for those that need them. We generally file
    design patents on our more advanced solutions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Software/Firmware
    Technology</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that our substantial software portfolio provides a
    competitive advantage. We have developed an extensive set of
    Windows XP/Vista 32 and 64 bit drivers, Mac through to WIN CE
    and .NET drivers and core code
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    49
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    capability that allows us to efficiently add new feature sets
    centered around our hardware and their related software
    products. We anticipate that this software technology will be
    the foundation for some of our future products. Additionally, we
    have a base of embedded microprocessor and field-programmable
    gate array (FPGA) code related to microdisplay drive
    electronics. We also have a large library of internally
    developed, copyright-protected software that is used throughout
    our products. Usable software applications and add-on accessory
    hardware drivers can greatly increase customer value of our
    Video Eyewear products.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Patents
    and other Intellectual Property</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have a comprehensive intellectual property policy which has
    as its objectives: (i)&#160;the development of new intellectual
    property both to ensure and further our intellectual property
    position in relation to personal display technology; and
    (ii)&#160;the maintenance of our valuable trade secrets and
    know-how. We seek to further achieve these objectives through
    the commencement of more education and training of our
    engineering staff and the adoption of appropriate systems and
    procedures for the creation, identification and protection of
    intellectual property.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our general practice is to file patent applications for our
    technology in the United States, Europe and Japan, while
    inventions which are considered to have the greatest potential
    are further protected by the filing of patent applications in
    additional countries, including Canada, Russia and China. We
    file and prosecute our patent applications in pursuit of the
    most extensive protection including, where appropriate, the
    applications of the relevant technology to the broader display
    industry.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that our intellectual property portfolio, coupled
    with our key supplier relationships and accumulated experience
    in the personal display field, gives us an advantage over
    potential competitors. We also believe our copyrights,
    trademarks, trade secrets, and patents are critical to our
    success, and we intend, directly or indirectly, to maintain and
    protect these. We also rely on proprietary technology, trade
    secrets, and know-how, which are not patented. To protect our
    rights in these areas, we require all employees and, where
    appropriate, contractors, consultants, advisors and
    collaborators to enter into confidentiality, invention
    assignment and non-competition agreements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition to our various patents, Vuzix currently has 11
    registered US trademarks and a total of 27 trademark
    registrations worldwide.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Competitors
    and Competitive Advantage</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The personal display industry in which we operate is highly
    competitive. We compete against both direct view display
    technology and against near-eye display technology. We believe
    that the principal competitive factors in the personal display
    industry include image size, image quality, image resolution,
    power efficiency, manufacturing cost, weight and dimension,
    feature implementation, ergonomics and finally the interactive
    capabilities of the overall display system.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Most of our competitors&#146; products are based on direct view
    display systems, in which the user views the display device, or
    screen, directly without magnification. These products have
    several disadvantages compared to virtual displays and our Video
    Eyewear products. If the screens are large enough to read as
    conventional internet page or HD video without external
    magnification or image zooming, the products must be large and
    bulky, such as laptops, personal computers or portable DVD
    players. If the displays are small, such as those incorporated
    in cellular phones and PDA-like devices, the screens are
    difficult to read when displaying higher resolution content.
    Despite the limitations of direct view personal displays,
    advanced multi-media enabled or smart cellular phones are being
    produced in ever increasing volumes by a number of
    manufacturers, including Motorola, Inc., Nokia Corporation, Sony
    Ericsson Mobile Communications AB, Research In Motion Limited,
    Samsung Electronics Co., Ltd., LG Electronics and Apple Inc.
    (Apple). We expect that these large and well-funded companies,
    as well as newer entrants into the marketplace, will make
    products that seek to compete with ours based on improvements to
    their existing direct view display technologies or on new
    technologies.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We also have competitors who produce near eye personal displays
    or Video Eyewear. However, most of our competitors&#146; current
    products lack one of more of the following critical features:
    advanced optics, video up-scanning, 3D stereoscopic support,
    on-screen video controls, and tracking. Furthermore, we believe
    that most of our
</DIV>

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    <BR>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    competitors&#146; near eye products have inferior optics,
    marginal electronics and poor industrial design and that, as a
    result, our Video Eyewear products are superior to those of our
    competitors in both visual performance and ergonomics. They are
    lightweight and provide high-resolution images. They have
    convenient and easy to use controls that enable the user to
    control the display. Our systems are also typically more
    power-efficient than those of our competitors. We believe that
    tracking technology is a critical component of any VR or AR
    system and that our patented tracking technology gives us a
    competitive advantage in the markets for those systems.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Competition&#160;&#151;
    Consumer Products</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A number of major companies, such as Sony, Olympus Corporation
    and Canon Inc., produced head worn video display products for
    the consumer market in the late 1990s. These products were not
    well accepted by consumers and were ultimately discontinued. We
    believe that these products were not well accepted because they
    were ergonomically unsatisfactory and provided only low
    resolution images and because, at that time, there was little
    demand for mobile Video Eyewear. When these products were
    available, video content was generally stored on video tape and
    could only be viewed by playing the videotape on a videotape
    recorder connected to a television. Currently there are a number
    of smaller companies that have products which compete with our
    Video Eyewear products. Our major competitors are MyVu, Zeiss,
    i-O Display Systems, LLC, DaeYang Co., Ltd., Cybermind
    Interactive Nederland, Mirage Innovations, Ltd., Lumus, Shenzhen
    Oriscape Electronic Co., Ltd., Microvision Corporation
    (Microvision) and Kopin.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Kopin began offering QVGA and VGA binocular display modules
    (BDM) complete with drive electronics to original equipment
    manufacturers (OEMs) in 2006. Those modules are designed for
    easy customization by OEMs and include microdisplays,
    backlights, optics and drive electronics. The availability of
    those BDMs has greatly reduced the investment required for new
    competitors to enter the business. To date, the Kopin products
    have been primarily used by Asian-based Video Eyewear
    manufacturers. Kopin does not currently compete with Vuzix at
    the retail level. Kopin is our primary supplier of microdisplays.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition to numerous Asian-based companies using Kopin BDMs,
    we currently have two principal competitors in the consumer
    Video Eyewear market: MyVu and Zeiss.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    MyVu has based its most recent product line on an optic design
    that results in relatively small virtual image sizes. While this
    allows for a smaller form factor, it does not provide the large
    virtual image that we believe consumers desire from Video
    Eyewear products. Images on our Video Eyewear products appear as
    much as four times larger than those on MyVu products. MyVu
    products also do not currently support 3D, VGA video from a PC
    or tracking. Finally, MyVu does not have a Video Eyewear product
    designed specifically for the gaming market.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Zeiss introduced its first Video Eyewear product in the spring
    of 2008. This product is bigger and bulkier than ours and we
    believe it will be less acceptable in the mobile markets. And
    while Zeiss does provide some level of 3D video support, it does
    not currently offer PC products nor does it support the tracking
    technology that would allow its products to be interactive.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There are also several Chinese manufacturers offering Video
    Eyewear products that have one or more of the deficiencies
    described above.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Competition&#160;&#151;
    Industrial and Defense</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Although several companies produce monocular Video Eyewear, we
    believe that opportunities for sales of their products to date
    have been limited. So far, the market opportunity outside of the
    night vision products has been limited primarily to trial tests,
    rather than commercial volume purchases for defense and
    industrial applications. We are aware of only very limited
    commercial volume purchases in the defense and industrial
    markets. Our current competitors in these markets are Liteye
    Systems, Inc., Lumus, Shimadzu Corporation, Microvision, Kopin,
    Creative Display Systems, LLC, OASYS Technology, LLC, Rockwell
    Collins, Inc. and its subsidiary Kaiser. Some of these companies
    are currently shipping product and others have only introduced
    prototypes
    <FONT style="white-space: nowrap">and/or</FONT> are
    offering only limited sample quantities. We expect that we will
    encounter competition in the future from major
</DIV>

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    <BR>
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    suppliers of imaging and information products for defense
    application, including DRS Technologies, Inc. (DRS), Insight
    Technology Incorporated, Raytheon Company and BAE Systems, Inc.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There is competition in all classes of products manufactured by
    us, including from divisions of the large companies, as well as
    many small companies. Our sales do not represent a significant
    share of the industry&#146;s market for any class of its
    products. The principal points of competition for electronic
    products of both a defense and industrial nature include, among
    other factors: price, product performance, the experience of the
    particular company and history of its dealings in such products.
    We, as well as other companies engaged in supplying equipment
    for military use, are subject to various risks, including,
    without limitation, dependence on US and foreign government
    appropriations and program allocations, the competition for
    available military business, and government termination of
    orders for convenience.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that most of the monocular Video Eyewear products
    offered by our competitors are inferior to ours because they are
    bulky, have small image sizes with poor optics
    <FONT style="white-space: nowrap">and/or</FONT> are
    currently priced higher than our products.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Competition&#160;&#151;
    Low-Vision Assist</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The majority of competitors in the low-vision assist market
    offer magnification systems that consist of a large desktop
    television or computer screen that displays a magnified version
    of an image captured by a hand scanner or stationary camera.
    Over 30&#160;companies currently offer such vision tools. The
    largest providers are Enhanced Vision Inc. (Enhanced Vision)
    (which markets its product under the Merlin brand name),
    MagniSight, Inc., Optelec Holding B.V., REHAN Electronics Ltd.
    (which markets it product under the Affinity brand name),
    Beirley Associates, Inc., Telesensory Corporation and eSight
    Corporation. Although the products offered by these companies
    can provide effective low-vision assistance to many users, they
    are not mobile and they are often difficult to use. They
    generally require the user to sit in front of the large screen
    to view the image. Recently, some companies, including Enhanced
    Vision, have introduced mobile digital magnifiers that include a
    camera and an integrated six-inch LCD screen. Enhanced
    Vision&#146;s product is marketed under the Amigo brand. We do
    not believe that any of these competitive products offers the
    flexibility of usage, portability and some of the advanced
    digital video signal processing capabilities of our LV920.
    Moreover, the utility of all of the other competitive tools is
    generally limited to reading, whereas the LV920, which employs a
    wearable camera and is mobile, can also be used for many other
    normal vision applications.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the wearable low-vision assist market, our competitors are
    manufacturers of optical loops and head worn optical systems and
    one manufacturer of a digital magnifying system similar to our
    LV920. The optical loops are usually worn by dentists, doctors,
    and jewelry makers for their fine work, and have gained limited
    use in the low-vision assist market due to their lack of signal
    processing and image brightness issues. The competitive digital
    magnifier is manufactured by Enhanced Vision and is sold under
    the Jordy and Maxport brand names. While the Enhanced Vision
    product has been sold for several years now, its market
    penetration has been limited. We believe our low-vision assist
    product is more ergonomic and offers more advanced digital video
    signal processing techniques than those manufactured by Enhanced
    Vision.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Sales and
    Marketing</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Sales</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our sales strategy is to introduce our products to the widest
    possible audience within our target markets. We focus today on
    the consumer and industrial and defense markets. Historically,
    most of our sales efforts were directed toward obtaining
    contracts to provide custom engineering solutions and products
    for the defense and industrial markets. However, in 2005, as our
    products and technology evolved, we began to also sell standard
    Video Eyewear products for the consumer markets. In fall 2008,
    we began offering products for the low-vision assist market.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have separate marketing and sales strategies for each of our
    target markets. We have an internal sales force of five people.
    We regularly attend industry trade shows in our markets and have
    begun establishing some level of separate branding for both of
    our divisions. The consumer division sells under the Vuzix name
    and the industrial and defense division under the
    Tac-Eye<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    name.
</DIV>

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    <BR>
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During the years 2008 and 2007, 63.8% and 67.6% of our sales
    were derived from providing goods and services to the US
    government, directly and indirectly. Of those amounts, 80.7% in
    fiscal 2008 and 20.7% in 2007 were derived from subcontracts
    with Kopin and DRS, and we are dependent upon continuing to be
    engaged as a subcontractor to them. We derived 35.4% of our
    sales from consumer Video Eyewear products in fiscal 2008 and
    32.4% and 21.2% in fiscal 2007 and 2006 respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Marketing</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our marketing group is responsible for product management,
    planning, advertising, marketing communications, and public
    relations. We intend to become known as the premier supplier of
    Video Eyewear in the consumer markets, where our products are
    currently sold under the
    iWear<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    brand. We also intend to become known as the premier supplier of
    virtual display technology and systems for the industrial,
    defense, and low-vision assist markets. We employ public
    relations firms in both the United States and England and a
    marketing firm to help convey our message through brochures,
    packaging, tradeshow messaging and advertising campaigns. We
    plan to undertake specific marketing activities as needed,
    including, but not limited to:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    product reviews, case studies and promotions in trade
    publications;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    enhancement and maintenance of our Website;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Internet and web page advertising and targeted emails;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    public relations, print advertising, catalogs and point of
    purchase displays
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    trade shows and sponsorships;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    co-marketing relationships with relevant companies in selected
    markets;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    Internet awareness and outreach activities.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><U><FONT style="font-family: 'Times New Roman', Times">Industrial
    and Defense</FONT></U></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We primarily solicit and manage our government/defense products
    and engineering services directly. We expect to continue to
    obtain business through marketing our existing reputation within
    the defense markets for quality, precision electronics for
    defense night vision and thermal weapons systems. We believe
    this market to be a relationship and &#147;word of mouth&#148;
    market in which large contracts are generally awarded only to
    those who have performed well on previous contracts. We employ,
    and expect to continue to employ, a Washington-based lobbying
    firm to help increase our visibility as a potential supplier in
    these markets and to assist us in uncovering new sales
    opportunities. We also act as a value added supplier, supplying
    our products to major defense suppliers, such as iRobot and DRS,
    to complement their products so that they can offer a complete
    turn-key solution to their potential defense customers. We are
    attempting to expand such partnerships and co-marketing
    agreements with government- and defense-focused value added
    resellers and system integrators, for our
    Tac-Eye<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    product lines. We market our products primarily through our own
    direct sales organization. Business is solicited from large
    industrial manufacturers and defense companies, the US
    government and foreign governments and major foreign electronic
    equipment companies. In certain countries we have and will use
    external sales representatives to help solicit and coordinate
    foreign contracts. We are also on the eligible list of
    contractors of many agencies of the US Department of Defense and
    may now be solicited by such agencies for procurement needs
    falling within the major classes of products we produce. We also
    search the various government contract offering sites for
    procurement programs in which we believe we are qualified to
    participate.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><U><FONT style="font-family: 'Times New Roman', Times">Consumer</FONT></U></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We engage in a variety of marketing efforts that are intended to
    drive customers to our products and to grow awareness of our
    consumer products and Video Eyewear in general. Public relations
    is an important aspect of our
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    53
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    marketing and we intend to continue to distribute samples of our
    products to key industry participants. We currently plan to
    focus our marketing efforts for the next 12&#160;months on:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    distinguishing the Video Eyewear product category from current
    competitors and legacy head mounted displays;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    building consumer acceptance and momentum around the new Video
    Eyewear category;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    creating awareness of the benefits of Video Eyewear as compared
    to existing technologies;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    creating brand awareness of the Vuzix,
    iWear<SUP style="font-size: 85%; vertical-align: text-top">&#174;</SUP>

    and
    Wrap<SUP style="font-size: 85%; vertical-align: top"><FONT style="font-variant: SMALL-CAPS">tm</FONT></SUP>

    brands.
</TD>
</TR>

</TABLE>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Video Eyewear and VR Video Eyewear products are currently
    sold directly to consumers, through select specialty retailers,
    through catalogue offerings and through third party North
    American distributors including D&#038;H and Wynit. Our products
    are currently sold by the following US based resellers: SkyMall,
    Brookstone, Hammacher Schlemmer, Amazon and Micro Center. Our
    website, www.vuzix.com is an important part of our direct sales
    efforts.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If our marketing efforts are successful and our sales volume
    increase we expect that most of our products will then be sold
    through the traditional consumer electronics and PC mass-market
    distribution channels and to a smaller extent from our current
    specialty retailers. Therefore, we intend to spend the majority
    of our marketing budget during this phase on website, direct
    sales support and on reseller incentives and support. For
    resellers with physical retail locations we began offering in
    the US, point of purchase systems that include a video frame
    running a slide show presentation on the products as well as an
    integrated fully functional Video Eyewear product that allows
    potential customers to use our products.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We may also explore and consider OEM and licensing relationships
    with manufacturing partners, consumer electronics firms, and
    mobile phone makers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to sell our products internationally through our
    growing network of international distributors. Our
    distributorships are being established on a country by country
    basis, where market size allows. Normally, we appoint two or
    more distributors in each area. However, in early 2009 we signed
    a letter of intent to negotiate a long-term exclusive
    distribution arrangement for the Chinese marketplace.
    Negotiations with the potential distributor are currently
    continuing and any definitive agreement will be subject to sales
    performance and volume requirements, along with an option to
    manufacture portions of our products under license directly in
    China for that marketplace only.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our initial international focus was on Japan. In late 2007 we
    opened a branch sales and service office in Tokyo, staffed by
    two full-time personnel. In addition to supporting local
    resellers and distributors and providing end user customer
    support, we are seeking new sales channels and partnerships with
    software and hardware solution providers in Japan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To serve the EU market, in spring 2008 we established a wholly
    owned subsidiary, Vuzix (Europe) Limited, through which to
    conduct our business. As of March&#160;31, 2009 we had resellers
    in 23 countries that had placed orders with us in the last six
    months. While we do not currently maintain a European office, we
    have contracted with a third-party end user technical support
    firm and fulfillment center to service our customers in the EU.
    We have also retained a sales consultant (who acts as our
    European Director of Operations), a UK public relations firm and
    a mobile applications consultant to provide us with advice
    regarding the European cellular phone market.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <I><U><FONT style="font-family: 'Times New Roman', Times">Low-Vision
    Assist </FONT></U></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to market our low-vision assist products through
    low-vision clinics, catalogs and the Internet. Our research
    indicates that most low-vision sufferers visit a low-vision
    clinic after visiting a retinal specialist (of which there are
    approximately 2,000 in the United States) or after a low-vision
    examination at an optometrist or ophthalmologist. We intend to
    develop an awareness campaign aimed at retina specialists and to
    provide demonstration systems and brochures at low-vision
    clinics, which are the most common purchase point for low-vision
    assist products. An internal sales force and independent sales
    representatives will be used to sell our products through and to
    those clinics. We intend to test our products against other
    low-vision aids and publish the results in medical journals and
    present them at medical conventions. There are at least five
    major trade shows each
</DIV>

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    <BR>
    54
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    year for retina specialists in North America and we intend to
    exhibit both our products and present the results of our testing
    at those shows.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Manufacturing</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Currently, we purchase product components from our suppliers and
    perform the final assembly of our Video Eyewear products
    ourselves in our Rochester, New York facility. We are
    experienced in the successful production of our products in
    moderate volumes. We expect to continue to perform final
    assembly of our Video Eyewear products ourselves over the short
    term. However, if our assembly volume increases and cost
    effective third party sourcing becomes feasible, we anticipate
    that we will outsource the bulk of the final assembly, with the
    possible exception of certain critical optical and display
    components.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We currently purchase almost all of the microdisplays used in
    our products from Kopin and eMagin. Kopin accounts for
    approximately 95% of our microdisplays by unit volume. We
    estimate that products incorporating Kopin microdisplays will
    account for approximately 46% of our sales in 2009 and products
    incorporating eMagin microdisplays will account for
    approximately 20% of our sales in 2009. We procured increasing
    percentages of our microdisplays from other sources, but they
    are very limited currently. While we do not manufacture our
    components, we own the tooling that is used to make our custom
    components (with the exception of Apple iPod authentication
    chips and connectors that we acquire directly under license from
    Apple) and we do not believe that we are dependent on our
    relationships with any supplier in order to continue to operate
    our business effectively. Some of our accessory products, such
    as screen-less portable DVD players and mouse based camera
    systems are sourced from third parties as finished goods. We
    typically have them print our Vuzix brand name on the products.
    Such third party products represent less than 2% of our sales in
    2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are committed to globally sourcing all our components to
    minimize product costs. We anticipate that procuring assembled
    products from third parties will result in decreased labor force
    requirements, capital equipment costs, component inventories,
    and the cost of maintaining inventories of work in progress. We
    generally procure components and products from our vendors on a
    purchase order basis without any long-term commitments. We
    currently use several Asian manufacturing sources, where we have
    located some of our tooling.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Employees</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date of this prospectus, we had 48&#160;full-time
    employees in North America: eight in sales and marketing,
    distribution, and customer service; 16 in research and
    development and engineering services support; 16 in
    manufacturing, operations and purchasing; one in quality
    assurance; and seven in finance, management, and administration.
    We also work with a group of sub-contractors mainly for
    industrial, mechanical and optical design assistance in the
    Rochester, New York area, some of which have been continually
    contracted over the last 36&#160;months. In Japan we have two
    full-time employees and in the UK we have one full-time
    contractor to manage our European sales and marketing activities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Facilities</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our manufacturing facility, consisting of approximately
    8,800&#160;square feet, is located at 2166 Brighton Henrietta
    Townline Road, Rochester, New York 14623, and our research and
    development, sales and administration offices, consisting of
    approximately 9,600&#160;square feet, are located in two
    different suites at 75 Town Centre Drive, Rochester, New York
    14623. We currently pay approximately $65,000 per year in rent
    for our manufacturing facility and $110,000 per year for our
    research and development, sales and administration offices. The
    manufacturing facility is leased on a calendar year term and we
    expect to renew the lease on substantially the same terms prior
    to its expiration at the end of 2009. Our lease on one office
    suite expired in May 2009 and our lease on the other office
    suite expires in June 2010. We currently occupy the suite on
    which our lease expired on a month-to-month basis. We expect to
    renew that lease on substantially the same terms in the near
    future. We have an option to terminate the lease expiring in
    June 2010 earlier subject to payment of a termination fee.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe that each of our facilities is in good operating
    condition and will adequately serve our needs for at least the
    next 12&#160;months. Subject to the successful completion of
    this offering, we intend to start re-consolidating our
    facilities. This will be done for efficiency reasons. We
    anticipate that, if required, suitable additional or
</DIV>

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    <BR>
    55
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    alternative space would be available on commercially reasonable
    terms to accommodate expansion of our operations.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Legal
    Proceedings</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As at the date of this prospectus, we are not a party to, and
    our property is not the subject of, any legal proceedings, we
    have not been a party to, and our property has not been the
    subject of, any such proceedings since our incorporation, and we
    are not aware of any such proceedings contemplated by or against
    us or our property.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There have been no penalties or sanctions imposed against us by
    a court relating to Canadian provincial and territorial
    securities legislation or by a Canadian securities regulatory
    authority within the three years immediately preceding the date
    of this prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There have been no penalties or sanctions imposed by a court or
    regulatory body against us that are necessary to be described
    herein for the prospectus to contain full, true and plain
    disclosure of all material facts relating to the securities
    being distributed, nor have we entered into any settlement
    agreements before a court relating to Canadian provincial and
    territorial securities legislation within the three years
    immediately preceding the date of this prospectus.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">History</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We were incorporated in Delaware in 1997 as VR Acquisition Corp.
    In 1997, we acquired substantially all of the assets of Forte
    Technologies, Inc. (Forte), which was engaged in the manufacture
    and sale of virtual reality headsets and the development of
    related technologies. It was originally owned and controlled by
    Kopin, our main current microdisplay supplier. Most of the
    technologies developed by Forte are now owned and used by us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Thereafter in 1997 we changed our name to Kaotech Corporation.
    In 1998 we changed our name to Interactive Imaging Systems, Inc.
    In 2004 we changed our name to Vicuity Corporation and then to
    Icuiti Corporation. In 2007, we changed to our current name,
    Vuzix Corporation. None of these name changes were the result of
    a change in our ownership control.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our corporate offices are located at 75 Town Centre Drive,
    Rochester, New York 14623. Our phone number is
    <FONT style="white-space: nowrap">(585)&#160;359-5900.</FONT>
    The URL for our website is www.vuzix.com. The information
    contained on, connected to or that can be accessed via our
    website is not part of this prospectus. We have included our
    website address in this prospectus as an inactive textual
    reference only and not as an active hyperlink.
</DIV>

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    <BR>
    56
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='113'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MANAGEMENT</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Executive
    Officers, Key Employees, Directors and Director
    Nominees</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Below are the names, ages and positions held with us of our
    executive officers, key employees, directors and directors elect.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="43%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="52%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Age</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Position(s)</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Paul J. Travers
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    47
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    CEO, President and Director
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Grant Russell
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    56
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    CFO, Executive Vice President and Director
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Vincent J. Ferrer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    37
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Director of Engineering
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Paul Churnetski
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    61
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Vice President&#160;&#151; Quality Assurance
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Gary VanCamp
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    62
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Vice President&#160;&#151; Low-Vision Assist Products
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Steven D. Ward
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    48
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Controller
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stephen J. Glaser
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    37
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Vice President&#160;&#151; Sales &#038; Marketing&#160;&#151;
    Defense
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Mike Hallett
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    36
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Director Sales&#160;&#151; Consumer
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Peter Artz
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    40
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Director of Manufacturing
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    William Lee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    56
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Director
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Frank Zammataro
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    51
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Director Elect
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Kathryn Sayko
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    42
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    Director Elect
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Bernard Perrine
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    46
</TD>
<TD>&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Director Elect
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Executive
    Officers</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Paul J. Travers </I>was the founder of Vuzix and has served
    as our President and Chief Executive Officer since 1997 and as a
    member of our board of directors since November 1997. Prior to
    the formation of Vuzix, Mr.&#160;Travers founded both
    <FONT style="white-space: nowrap">e-Tek</FONT> Labs,
    Inc. and Forte Technologies Inc. He has been a driving force
    behind the development of our products for the consumer market.
    With more than 20&#160;years experience in the consumer
    electronics field, and 13&#160;years experience in the virtual
    reality and virtual display fields, he is a nationally
    recognized industry expert. He holds an Associate degree in
    engineering science from Canton, ATC and a Bachelor of Science
    degree in electrical and computer engineering from Clarkson
    University. Mr.&#160;Travers resides in Honeoye Falls, New York,
    United States.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Grant Russell </I>has served as our Chief Financial Officer
    since 2000 and as a member of our board of directors since April
    2009. From 1997 to 2004, Mr.&#160;Russell developed and
    subsequently sold a successful software firm and a new concept
    computer store and cyber caf&#233;. In 1984, he
    <FONT style="white-space: nowrap">co-founded</FONT>
    Advanced Gravis Computer (Gravis), which, under his leadership
    as President, grew to become the world&#146;s largest PC and
    Macintosh joystick manufacturer with sales of $44&#160;million
    worldwide and 220&#160;employees. Gravis was listed on NASDAQ
    and the Toronto Stock Exchange. In September 1996 it was
    acquired by a US-based Fortune 100&#160;company in a successful
    public tender offer. Mr.&#160;Russell holds a Bachelor of
    Commerce degree in finance from the University of British
    Columbia and is both a US Certified Public Accountant and a
    Canadian Chartered Accountant. Mr.&#160;Russell resides in
    Vancouver, British Columbia, Canada.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Key
    Employees</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Paul J. Churnetski</I>&#160;&#151; Mr.&#160;Churnetski held
    the position of Vice President of Manufacturing from November
    1997 to December 2005, when he became Vice President of Quality
    Assurance at Vuzix. Mr.&#160;Churnetski was also a member of our
    board of directors from November 1997 to August 2007. He was
    previously employed with medical manufacturers Fisons Corp. and
    Pennwalt Corp., where he held senior positions in the areas of
    technical operations, quality assurance, manufacturing, and
    information technology. He holds a Bachelor of Science degree in
    chemistry and a Master of Science degree in physical chemistry
    from the State University of New York, College at Geneseo, and
    was previously certified as a Quality Engineer.
    Mr.&#160;Churnetski resides in Henrietta, New York, United
    States.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    57
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Vincent J. Ferrer </I>has served as our Director of
    Engineering since September 2005. Mr.&#160;Ferrer is responsible
    for directing our research and development team as well as
    managing our intellectual property portfolio and regulatory
    affairs for markets served. From July 1993 to September 2005,
    Mr.&#160;Ferrer was an engineer and project manager at Belkin
    Components, Inc. Mr.&#160;Ferrer holds a Bachelor of Science
    degree in engineering from Rochester Institute of Technology.
    Mr.&#160;Ferrer resides in Pittsford, New York, United States.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Gary VanCamp </I>has been with us since March 2004 and has
    served as our Vice President&#160;&#151; Low-vision Assist
    Products since August 2007. Prior to joining us,
    Mr.&#160;VanCamp was a Project Manager&#160;&#151; World Wide
    Training (Sales and Marketing Department) at Intel Corporation
    from January 2000 through July 2003. His more than 25&#160;years
    of electronics engineering, manufacturing, and project
    management experience includes project management, Vice
    President of Engineering positions and extensive hardware design
    and development experience. Mr.&#160;VanCamp holds a Bachelor of
    Science degree in electrical/electronics engineering from
    Rochester Institute of Technology. Mr.&#160;VanCamp resides in
    Rochester, New York, United States.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Steven D. Ward </I>has served as our Controller since January
    1998. Mr.&#160;Ward, a Certified Public Accountant, is
    responsible for all of our accounting and human resource
    services. Mr.&#160;Ward&#146;s previous experience includes
    positions as Controller/Tax Manager for AM&#038;M Companies, a
    financial services firm, and as a principal in a regional
    certified public accounting firm. Mr.&#160;Ward holds a Bachelor
    of Science degree in accounting from the State University of New
    York, College at Fredonia. Mr.&#160;Ward resides in Rochester,
    New York, United States.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stephen J. Glaser </I>has served as our Vice President
    Sales&#160;&#038; Marketing&#160;&#151; Defense and Industrial
    since January 2000. Prior to joining Vuzix, Mr.&#160;Glaser
    worked in sales with Johnson&#160;&#038; Johnson.
    Mr.&#160;Glaser holds a Bachelor of Science degree in marketing
    and business administration from State University of New York,
    Empire State College. Mr.&#160;Glaser resides in Pittsford, New
    York, United States.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Michael Hallett </I>has been with us since May 2005 and has
    served as our Director of Sales&#160;&#151; Consumer since
    October 2008. From June 2004 to May 2005, Mr.&#160;Hallett was a
    sales manager at Wards Natural Science. Prior to that position,
    Mr.&#160;Hallett had sales potions at Unisys Corporation and
    Paychex, Inc. Mr.&#160;Hallett holds a Bachelor of Science
    degree in business administration with a concentration in
    marketing and a minor in economics from the State University of
    New York, College at Brockport. Mr.&#160;Hallett resides in
    Canandaigua, New York, United States.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Peter Artz </I>has been with us since February 2005 and has
    served as our Director of Manufacturing since October 2006.
    Mr.&#160;Artz is responsible for directing our Production,
    Manufacturing Engineering and Purchasing activities. Prior to
    joining Vuzix, Mr.&#160;Artz was with PSC Inc. for eight years
    as a Senior Manufacturing Engineer, developing laser barcode
    scanners. Mr.&#160;Artz holds a Bachelor of Science degree in
    manufacturing engineering from Rochester Institute of
    Technology. Mr.&#160;Artz resides in Penfield, New York, United
    States.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Director</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>William Lee </I>has served as a member of our board of
    directors since June 2009. Mr.&#160;Lee has been self-employed
    as a financial consultant since May 2008. From January 2006 to
    May 2008, he served as Chief Financial Officer of Jinshan Gold
    Mines Inc., a mining company listed on the Toronto Stock
    Exchange. From July 2004 to December 2005, he was engaged as a
    business analyst for Ivanhoe Energy Inc., a Toronto Stock
    Exchange and NASDAQ-listed company, and Ivanhoe Mines Ltd.
    Vancouver, an independent international heavy oil development
    and production company with operations in Canada, the United
    States, China, and Ecuador and listed on the New&#160;York and
    Toronto Stock Exchanges. Mr.&#160;Lee spent nine years engaged
    in the practice of public accounting with the firm of
    Deloitte&#160;&#038; Touche. Mr.&#160;Lee is a member of the
    Institute of Chartered Accountants of British Columbia and holds
    a Bachelor of Commerce degree from the University of British
    Columbia. Mr.&#160;Lee also currently serves as a director of
    Tinka Resources Ltd., Halo Resources Ltd., both of which are
    listed on the
    <FONT style="white-space: nowrap">TSX-V,</FONT> and
    Golden Peaks Resources Ltd., which is listed on the TSX.
    Mr.&#160;Lee resides in Delta, British Columbia, Canada.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Directors
    Elect</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Frank Zammataro </I>has been elected, and has agreed to
    serve, as a member of our board of directors upon the
    effectiveness of the registration statement of which this
    prospectus forms a part. Mr.&#160;Zammataro is the President of
    Rentricity, Inc., a privately held, renewable energy company
    which he founded in 2003. Prior to founding that
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    58
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    business, Mr.&#160;Zammataro served as Chief Marketing Officer
    of w-Technologies, Inc., a wireless solutions
    <FONT style="white-space: nowrap">start-up</FONT>
    which provided a software platform and applications framework
    for companies developing consumer-based wireless services. From
    1979 through 2000, he was employed by Merrill Lynch, Pierce,
    Fenner&#160;&#038; Smith Inc., where in his last position he led
    the Internet-related market and services development activities.
    He holds a Bachelor of Arts degree in communications arts and
    political science from St. John&#146;s University and is a
    graduate of the Executive Management Program of the Wharton
    School of the University of Pennsylvania. Mr.&#160;Zammataro
    resides in Chatham, New Jersey, United States.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Kathryn Sayko </I>has been elected, and has agreed to serve,
    as a member of our board of directors upon the effectiveness of
    the registration statement of which this prospectus forms a
    part. Ms.&#160;Sayko is a Managing Director of J.P.&#160;Morgan,
    Inc., most recently serving as its Head of North East Middle
    Market Investment Banking Coverage. Ms.&#160;Sayko has been
    employed by J.P.&#160;Morgan since 1993. She holds a Bachelor of
    Business Administration degree from James Madison University
    School of Business and a Master of Business Administration
    degree from New&#160;York University, Stern School of Business.
    Ms.&#160;Sayko resides in New York City, New York, United States.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Bernard Perrine </I>has been elected, and has agreed to
    serve, as a member of our board of directors upon the
    effectiveness of the registration statement of which this
    prospectus forms a part. Mr.&#160;Perrine, one of the founders
    of Kinko&#146;s Inc., has been self-employed as a business
    consultant since December 2007. From November 2006 through
    December 2007, Mr.&#160;Perrine served as Vice President
    &#151;&#160;U.S.&#160;Sales and Marketing of Rexel, Inc., an
    electrical distribution company. From September 2005 through May
    2006, he served as Chief Executive Officer of Telezygology,
    Inc., a
    <FONT style="white-space: nowrap">start-up</FONT>
    provider of intelligent fastening technologies. From August 2004
    through September 2005, he was a Worldwide General Manager for
    Microsoft, Inc. Prior to August 2004, Mr.&#160;Perrine was
    Worldwide Vice President/General Manager, Digital&#160;&#038;
    Film Imaging Systems for Eastman Kodak Co. He holds a Bachelor
    of Science degree in management from the University of Akron. He
    has also completed Executive Management courses at Harvard
    University and the University of Pennsylvania. Mr.&#160;Perrine
    resides in Lincolnshire, Illinois, United States.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Indebtedness
    of Directors and Executive Officers</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date of this prospectus, no amount is owed to us or
    any of our subsidiaries by any of our directors, directors elect
    or executive officers.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date hereof and during the fiscal period ended
    December&#160;31, 2008, there was no indebtedness owing to us in
    connection with the purchase of securities or other indebtedness
    by any of our current or former executive officers, directors or
    employees except as described below under the &#147;Related
    Party Transactions&#160;&#151; Officer Loan.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    No individual who is, or at any time during our most recent
    completed fiscal year was, a director or officer of our company,
    none of our directors elect, or any associate of any one of them
    is, or at any time since the beginning of our most recent
    completed fiscal year has been, indebted to us (other than in
    respect of amounts which would constitute routine indebtedness)
    or was indebted to another entity, which such indebtedness is,
    or was at any time during our most recent completed fiscal year,
    the subject of a guarantee, support agreement, letter of credit
    or other similar arrangement or understanding provided by us
    except as described below under the &#147;Related Party
    Transactions&#160;&#151; Officer Loan.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Family
    Relationships</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    There is no family relationship between or among any of our
    directors, directors elect or executive officers.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Involvement
    in Certain Legal Proceedings</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During the past five years, none of our directors, directors
    elect, executive officers, promoters or control persons has:
    (1)&#160;filed a petition under the federal bankruptcy laws or
    any state insolvency law, nor had a receiver, fiscal agent or
    similar officer appointed by a court for the business or present
    of such a person, or any partnership in which he was a general
    partner at or within two yeas before the time of such filing, or
    any corporation or business association of which he was an
    executive officer within two years before the time of such
    filing; (2)&#160;was convicted in a criminal proceeding or named
    subject of a pending criminal proceeding (excluding traffic
    violations and other minor offenses); (3)&#160;was the subject
    of any order, judgment or decree, not subsequently reversed,
    suspended or
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    59
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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    vacated, of any court of competent jurisdiction, permanently or
    temporarily enjoining him from or otherwise limiting the
    following activities: (i)&#160;acting as a futures commission
    merchant, introducing broker, commodity trading advisor,
    commodity pool operator, floor broker, leverage transaction
    merchant, associated person of any of the foregoing, or as an
    investment advisor, underwriter, broker or dealer in securities,
    or as an affiliated person, director of any investment company,
    or engaging in or continuing any conduct or practice in
    connection with such activity; (ii)&#160;engaging in any type of
    business practice; (iii)&#160;engaging in any activity in
    connection with the purchase or sale of any security or
    commodity or in connection with any violation of federal or
    state securities laws or federal commodity laws; (4)&#160;was
    the subject of any order, judgment or decree, not subsequently
    reversed, suspended or vacated, of any federal or state
    authority barring, suspending or otherwise limiting for more
    than 60&#160;days the right of such person to engage in any
    activity described in clause&#160;(3) above, or to be associated
    with persons engaged in any such activity; (5)&#160;was found by
    a court of competent jurisdiction in a civil action or by the
    SEC to have violated any federal or state securities law and the
    judgment in subsequently reversed, suspended or vacate; or
    (6)&#160;was found by a court of competent jurisdiction in a
    civil action or by the Commodity Futures Trading Commission
    (CFTC) to have violated any federal commodities law, and the
    judgment in such civil action or finding by the CFTC has not
    been subsequently reversed, suspended or vacated.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Cease
    Trade Orders, Bankruptcies and Penalties and Sanctions</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    None of our directors, directors elect, officers or control
    persons is, or within the ten years prior to the date of this
    prospectus has been, (a)&#160;a director, chief executive
    officer or chief financial officer of any issuer (including us)
    that, (i)&#160;was subject to an order that was issued while
    that person was acting in the capacity as director, chief
    executive officer or chief financial officer, or (ii)&#160;was
    subject to an order that was issued after that person ceased to
    be a director, chief executive officer or chief financial
    officer and which resulted from an event that occurred while
    that person was acting in the capacity as director, chief
    executive officer or chief financial officer; or (b)&#160;a
    director or executive officer of any company (including us)
    that, while that person was acting in that capacity, or within a
    year of that person ceasing to act in that capacity, became
    bankrupt, made a proposal under any legislation relating to
    bankruptcy or insolvency or was subject to or instituted any
    proceedings, arrangement or compromise with creditors or had a
    receiver, receiver manager or trustee appointed to hold its
    assets. For the purposes of this paragraph, &#147;order&#148;
    means a cease trade order, an order similar to a cease trade
    order or an order that denied the relevant company access to any
    exemption under securities legislation, in each case that was in
    effect for a period of more than 30 consecutive days.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    None of our directors, directors elect, officers or control
    persons has been subject to any penalties or sanctions imposed
    by a court relating to securities legislation or by a securities
    regulatory authority or has entered into a settlement agreement
    with a securities regulatory authority or has been subject to
    any other penalties or sanctions imposed by a court or
    regulatory body which would be important to a reasonable
    investor making an investment decision.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    None of our directors, directors elect, officers or control
    persons (or a personal holding company of any such person) is,
    or within the ten years prior to the date of this prospectus has
    become, bankrupt, made a proposal under any legislation relating
    to bankruptcy or insolvency or has been subject to or instituted
    any proceedings, arrangement or compromise with creditors, or
    had a receiver, receiver manager or trustee appointed to hold
    his assets.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Conflicts
    of Interest</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Certain of our proposed directors are also directors of other
    public companies and our existing and proposed directors and
    officers are or may be shareholders of other public companies.
    Accordingly, conflicts of interest may arise between such
    persons&#146; duties as directors and officers of Vuzix and
    their positions as directors and shareholders of such other
    companies. All such possible conflicts are required to be
    disclosed in accordance with the requirements of applicable
    corporate law and the directors and officers are required to act
    in accordance with the obligations imposed on them by law.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    60
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='114'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXECUTIVE
    COMPENSATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    Compensation Table</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth information for the fiscal years
    ended December&#160;31, 2008 and 2007 concerning compensation of
    (i)&#160;the one individual serving as our principal executive
    officer during the fiscal year ended December&#160;31, 2008 and
    (ii)&#160;the one individual serving as our principal financial
    officer during the fiscal year ended December&#160;31, 2008
    (collectively, the &#147;named executive officers&#148;):
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SUMMARY
    COMPENSATION TABLE</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="46%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Stock<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>All Other<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Salary<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Bonus<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Awards<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Compensation<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Total<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name and Principal Position</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Paul J. Travers, President and
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    200,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    200,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Chief Executive Officer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2007
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    142,460
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    142,460
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Grant Russell, Chief Financial
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    175,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    24,571
</TD>
<TD nowrap align="left" valign="bottom">
    (1)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    199,571
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Officer&#160;&#038; Executive Vice President
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2007
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    127,407
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    23,309
</TD>
<TD nowrap align="left" valign="bottom">
    (1)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    150,716
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=60 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Consists of amounts paid to Mr.&#160;Russell as a reimbursement
    for the rental of an automobile and direct travel to and from
    his residence in Vancouver, Canada to Rochester.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Employment
    Agreements</FONT></B>
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Paul
    J. Travers</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On August&#160;1, 2007, we entered into an employment agreement
    with Paul J. Travers providing for his continued service as our
    Chief Executive Officer and President. Under the agreement,
    Mr.&#160;Travers is entitled to an initial annual base salary of
    $200,000, subject to increases in the sole discretion of the
    board of directors, and upon the initial public offering of
    common stock an annual base salary of $300,000 or such greater
    amount as shall be determined by the board of directors. He is
    also eligible to receive such periodic, annual or other bonuses
    as the board of directors in its sole discretion shall determine
    and to participate in all bonus plans established for our senior
    executives. The agreement also provides that Mr.&#160;Travers
    may be awarded, in the sole discretion of the board of
    directors, stock options and other awards under any plan or
    arrangement for which our senior executives are eligible. The
    level of his participation in any such plan or arrangement shall
    be determined by the board of directors in its sole discretion.
    To the greatest extent permissible under the Internal Revenue
    Code (the Code) and the regulations thereunder, options granted
    to Mr.&#160;Travers shall be incentive stock options within the
    meaning Section&#160;422 of the Code. He is also eligible to
    participate in all employee benefit plans which are generally
    available to our senior executives and entitled to receive
    fringe benefits and perquisites comparable to those of our other
    senior executives.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Mr.&#160;Travers&#146; employment under the agreement shall
    continue indefinitely until terminated by him or by us. In the
    event that his employment is terminated by us other than for
    &#147;cause&#148; (as defined in the agreement), by him for
    &#147;good reason&#148; (as defined in the agreement) or upon
    his death or &#147;disability&#148; (as defined in the
    agreement), Mr.&#160;Travers shall be entitled to be paid, in
    addition to any base salary and bonuses then accrued and unpaid,
    and his then current base salary for 24&#160;months after the
    date of termination and the entire bonus that would have been
    payable pursuant to any agreement, understanding, arrangement or
    plan in which he is entitled to participate for the year in
    which the termination of his employment occurred as if he had
    been employed for the entire year, provided that, in the opinion
    of the board of directors, he is likely to have met any bonus
    plan goals for the relevant period had he not been terminated.
    As a condition to our obligation to make any such payment, we,
    in our sole discretion, may require Mr.&#160;Travers to release
    us and our officers, directors, employees, and agents, from any
    and all claims and causes of action, including, but not limited
    to those arising from his employment and the termination of his
    employment. In the event of such termination, all stock options,
    restricted stock grants, stock appreciation rights and other
    similar awards held by Mr.&#160;Travers at the date of
    termination shall immediately vest, the period during which any
    options or rights relating to such grants may be exercised shall
    be the longer of the date specified in such
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    grants or the date that is thirty (30)&#160;days after the end
    of the
    <FONT style="white-space: nowrap">24-month</FONT>
    period following the date of termination and will, in all other
    respects, continue to be governed by, and continued in
    accordance with, their applicable plan and grant documents. In
    the event that Mr.&#160;Travers&#146;s employment is terminated
    by us for cause or by him other than for good reason,
    Mr.&#160;Travers shall be entitled to be paid only any base
    salary then accrued and unpaid and annual bonus amounts for any
    fiscal year completed prior to the date of termination and we
    shall have no further obligations to&#160;him.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the event of a &#147;change of control&#148; (as defined in
    the agreement), any unvested stock options held by
    Mr.&#160;Travers shall be fully vested and become immediately
    exercisable. Such options shall remain exercisable for the
    period remaining under the relevant stock option agreement and
    shall not have a shortened period of exercisability as a result
    of the change of control, except for statutory stock options
    which shall, at Mr.&#160;Travers&#146;s election,
    (i)&#160;expire 90&#160;days after his termination (or one year
    after his termination upon his death or permanent and total
    disability) or (ii)&#160;be converted into non-qualified stock
    options expiring at the end of the entire term of such option
    under the relevant stock option agreement. Additionally, if
    Mr.&#160;Travers is terminated within one year of a change of
    control for any reason other than by us for cause, or if he
    elects to terminate his employment (whether or not for good
    reason) after the expiration of 120&#160;days after and on or
    before the two-year anniversary of a change of control,
    Mr.&#160;Travers shall be entitled to be paid, in addition to
    any base salary and bonuses then accrued and unpaid, and his
    then current base salary for 48&#160;months after the date of
    termination and the entire bonus that would have been payable
    pursuant to any agreement, understanding, arrangement or plan in
    which he is entitled to participate for the year in which the
    termination of his employment occurred as if he had been
    employed for the entire year, provided that, in the opinion of
    the board of directors, he is likely to have met any bonus plan
    goals for the relevant period had he not been terminated.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under his agreement, we are obligated to reimburse
    Mr.&#160;Travers for the costs of an automobile at the rate of
    $750 per month and for all actual, reasonable and customary
    expenses incurred in the course of his employment in accordance
    with our policies as then in effect. Mr.&#160;Travers is subject
    to certain restrictive covenants under the agreement, including
    a covenant not to compete for 24&#160;months after his
    termination for any reason other than by him for good reason or
    by us without cause and for 48&#160;months after his termination
    if such termination results in our obligation to pay him the
    change of control payment described above.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Grant
    Russell</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On August&#160;1, 2007, we entered into an employment agreement
    with Grant Russell providing for his continued service as our
    Chief Financial Officer and Executive Vice President. Under the
    agreement, Mr.&#160;Russell is entitled to an initial annual
    base salary of $175,000, subject to increases in the sole
    discretion of the board of directors, and upon the initial
    public offering of common stock an annual base salary of
    $275,000 or such greater amount as shall be determined by the
    board of directors. He is also eligible to receive such
    periodic, annual or other bonuses as the board of directors in
    its sole discretion shall determine and to participate in all
    bonus plans established for our senior executives. The agreement
    also provides that Mr.&#160;Russell may be awarded, in the sole
    discretion of the board of directors, stock options and other
    awards under any plan or arrangement for which our senior
    executives are eligible. The level of his participation in any
    such plan or arrangement shall be determined by the board of
    directors in its sole discretion. To the greatest extent
    permissible under the Code and the regulations thereunder,
    options granted to Mr.&#160;Russell shall be incentive stock
    options within the meaning of Section&#160;422 of the Code. He
    is also eligible to participate in all employee benefit plans
    which are generally available to our senior executives and
    entitled to receive fringe benefits and perquisites comparable
    to those of our other senior executives.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Mr.&#160;Russell&#146;s employment under the agreement shall
    continue indefinitely until terminated by him or by us. In the
    event that his employment is terminated by us other than for
    &#147;cause&#148; (as defined in the agreement), by him for
    &#147;good reason&#148; (as defined in the agreement) or upon
    his death or &#147;disability&#148; (as defined in the
    agreement), Mr.&#160;Russell shall be entitled to be paid, in
    addition to any base salary and bonuses then accrued and unpaid,
    and his then current base salary for 24&#160;months after the
    date of termination and the entire bonus that would have been
    payable pursuant to any agreement, understanding, arrangement or
    plan in which he is entitled to participate for the year in
    which the termination of his employment occurred as if he had
    been employed for the entire year, provided that, in the opinion
    of the board of directors, he is likely to have met any bonus
    plan goals for the relevant period had he not been terminated.
    As a condition to our obligation to make any such payment, we,
    in our sole discretion, may
</DIV>

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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    require Mr.&#160;Russell to release us and our officers,
    directors, employees, and agents, from any and all claims and
    causes of action, including, but not limited to those arising
    from his employment and the termination of his employment. In
    the event of such termination, all stock options, restricted
    stock grants, stock appreciation rights and other similar awards
    held by Mr.&#160;Russell at the date of termination shall
    immediately vest, the period during which any options or rights
    relating to such grants may be exercised shall be the longer of
    the date specified in such grants or the date that is thirty
    (30)&#160;days after the end of the
    <FONT style="white-space: nowrap">24-month</FONT>
    period following the date of termination and will, in all other
    respects, continue to be governed by, and continued in
    accordance with, their applicable plan and grant documents. In
    the event that Mr.&#160;Russell&#146;s employment is terminated
    by us for cause or by him other than for good reason,
    Mr.&#160;Russell shall be entitled to be paid only any base
    salary then accrued and unpaid and annual bonus amounts for any
    fiscal year completed prior to the date of termination and we
    shall have no further obligations to&#160;him.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the event of a &#147;change of control&#148; (as defined in
    the agreement), any unvested stock options held by
    Mr.&#160;Russell shall be fully vested and become immediately
    exercisable. Such options shall remain exercisable for the
    period remaining under the relevant stock option agreement and
    shall not have a shortened period of exercisability as a result
    of the change of control, except for statutory stock options
    which shall, at Mr.&#160;Russell&#146;s election,
    (i)&#160;expire 90&#160;days after his termination (or
    1&#160;year after his termination upon his death or permanent
    and total disability) or (ii)&#160;be converted into
    non-qualified stock options expiring at the end of the entire
    term of such option under the relevant stock option agreement.
    Additionally, if Mr.&#160;Russell is terminated within one year
    of a change of control for any reason other than by us for
    cause, or if he elects to terminate his employment (whether or
    not for good reason) after the expiration of 120&#160;days after
    and on or before the two-year anniversary of a change of
    control, Mr.&#160;Russell shall be entitled to be paid, in
    addition to any base salary and bonuses then accrued and unpaid,
    and his then current base salary for 48&#160;months after the
    date of termination and the entire bonus that would have been
    payable pursuant to any agreement, understanding, arrangement or
    plan in which he is entitled to participate for the year in
    which the termination of his employment occurred as if he had
    been employed for the entire year, provided that, in the
    opinion&#160;of the board of directors, he is likely to have met
    any bonus plan goals for the relevant period had he not been
    terminated.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under his agreement, we are obligated to either reimburse
    Mr.&#160;Russell for the costs of an automobile at the rate of
    $750 per month or to bear all expenses associated with his lease
    of an automobile for his use while in Rochester, New York and to
    reimburse him for all actual, reasonable and customary expenses
    incurred in the course of his employment in accordance with our
    policies as then in effect. Mr.&#160;Russell is subject to
    certain restrictive covenants under the agreement, including a
    covenant not to compete for 24 months after his termination for
    any reason other than by him for good reason or by us without
    cause and for 48&#160;months after his termination if such
    termination results in our obligation to pay him the change of
    control payment described above.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">2007
    Amended and Restated Stock Option Plan</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our stock option plan was originally adopted by our board of
    directors and approved by our stockholders in October 1997. Our
    board of directors adopted and our stockholders approved the
    adoption of the amendment and restatement of our 1997 plan in
    August 2007. Throughout this prospectus we refer to the plan as
    amended and restated as our 2007 option plan. An aggregate of
    45,714,288&#160;shares of our common stock are reserved for
    issuance under the 2007 option plan. Our board of directors has
    determined that, upon the effectiveness of the registration
    statement of which this prospectus forms a part, no further
    options will be granted under our 2007 option plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Shares Available for Awards.</I>&#160;&#160;As of the date of
    this prospectus, we had issued 2,876,263&#160;shares of our
    common stock upon the exercise of options granted under the 2007
    option plan, options to purchase 15,304,554&#160;shares of
    common stock had been issued and were outstanding under the plan
    and 27,533,471&#160;shares of common stock remained available
    for issuance under the plan. Our board of directors has
    determined that, upon the effectiveness of the registration
    statement of which this prospectus forms a part, no further
    options will be granted under our 2007 option plan.
</DIV>

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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Eligibility.</I>&#160;&#160;Only our employees, our
    directors, our consultants and other key persons are eligible to
    participate in our 2007 option plan. We may grant incentive
    stock options only to employees.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Administration.</I>&#160;&#160;Our board of directors
    administers the 2007 option plan. Our board, however, may
    delegate this authority to a committee of one or more directors.
    The party administering our 2007 option plan, whether it is our
    board of directors or a committee appointed by our board of
    directors, is referred to under the 2009 option plan as the
    &#147;committee&#148;. Subject to the provisions of the 2007
    option plan and the rules of any stock exchange on which shares
    of our common stock may be listed, the committee has complete
    authority to interpret the 2007 option plan, to prescribe, amend
    and rescind rules and regulations relating to it, to determine
    who will receive stock options, to determine the terms and
    provisions of the respective option agreements (which need not
    be identical), and to make all other determinations necessary or
    advisable for the administration of the 2007 option plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stock Options.</I>&#160;&#160;We grant incentive and
    nonstatutory stock options under the plan pursuant to incentive
    and nonstatutory stock option agreements. The committee
    determines who will receive stock options, whether the stock
    options will be incentive or nonstatutory stock options, and the
    number of stock options to be granted. The committee determines
    the exercise price for a stock option, consistent with the terms
    and conditions of the 2007&#160;plan and applicable law. The
    exercise price of any incentive stock option cannot be less than
    100% of the fair market value of our common stock on the date of
    grant. Under the 2007 option plan, &#147;fair market value&#148;
    means the value of a share of the Company&#146;s common stock on
    any date as determined by the committee. The exercise price for
    stock options shall be paid in the form of cash or certified or
    bank check, or consideration received by us under a cashless
    exercise program if implemented by us in connection with the
    2007 option plan and if permitted by the rules of any stock
    exchange on which shares of our common stock may be listed.
    Options granted under the 2007 option plan vest at the rate
    determined by the committee and specified in each stock option
    agreement. The committee determines the term of stock options
    granted under the 2007 option plan, which can be up to ten
    years, except in the case of certain incentive stock options,
    which may have a term of up to five years. Unless an option
    agreement provides otherwise, if an optionee&#146;s employment
    with the Company is terminated for any reason, whether voluntary
    or otherwise, the optionee, or his or her beneficiary, may
    exercise any vested options for a period of 30&#160;days from
    the date of termination of service. An optionee may not exercise
    an option beyond the expiration of its term.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Adjustment of Shares.</I>&#160;&#160;In the event that we
    have a specified type of change in our capital structure, such
    as, a stock split, stock dividend, recapitalization, spin-off,
    reclassification or similar occurrence, then the committee must
    appropriately adjust the number of shares reserved under the
    2007 option plan, as well as the numbers of shares covered by
    each outstanding award and the exercise prices or purchase
    prices, if applicable, of all outstanding stock awards under the
    2007 option plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Consolidation or Merger.</I>&#160;&#160;In the event of any
    consolidation or merger of the Company with or into another
    company or in case of any sale or conveyance to another company
    or entity of the property of the Company as a whole or
    substantially as a whole, shares of stock or other securities
    equivalent in kind and value to those shares and other
    securities an optionee would have received if he or she had held
    the full number of shares of common stock remaining subject to
    the option immediately prior to such consolidation, merger, sale
    or conveyance and had continued to hold those shares (together
    with all other shares, stock and securities thereafter issued in
    respect thereof) to the time of the exercise of the option shall
    thereupon be subject to the option. However, unless any option
    agreement shall provide different or additional terms, in any
    such transaction the committee, in its discretion, may provide
    instead that any outstanding option shall terminate, to the
    extent not exercised by the optionee prior to termination,
    either (a)&#160;at the close of a period of not less than ten
    (10)&#160;days specified by the committee and commencing on the
    committee&#146;s delivery of written notice to the optionee of
    its decision to terminate such option without payment of
    consideration as provided in the following clause or (b)&#160;as
    of the date of the transaction, in consideration of the
    Company&#146;s payment to the optionee of an amount of cash
    equal to the difference between the aggregate fair market value
    of the shares of common stock for which the option is then
    exercisable and the aggregate exercise price for such shares
    under the option.
</DIV>

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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Other Terms.</I>&#160;&#160;Whenever shares are to be issued
    in satisfaction of an option granted under our 2007 option plan,
    the Company shall have the right to require the optionee to
    remit to the Company an amount sufficient to satisfy federal,
    state, local or other withholding tax requirements if and to the
    extent required by law (whether so required to secure for the
    Company an otherwise available tax deduction or otherwise) prior
    to the delivery of any certificate or certificates for such
    shares. An optionee may not transfer a stock option granted
    under our 2007 option plan other than by will or the laws of
    descent and distribution, and each option is exercisable, during
    the lifetime of the optionee, only by the optionee. Shares
    issued upon exercise of an option may be subject to forfeiture
    conditions, rights of repurchase, rights of first refusal and
    other transfer restrictions as determined by the committee and
    as set forth in the stock option agreement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Amendment and Termination.</I>&#160;&#160;Subject to
    compliance with the rules of any stock exchange on which shares
    of our common stock may be listed, the 2007 option plan may be
    amended, altered, suspended or terminated by our board of
    directors at any time. We may not alter the rights and
    obligations under any option granted before amendment of the
    2007 option plan without the written consent of the affected
    optionee. Our board of directors has determined that, upon the
    effectiveness of the registration statement of which this
    prospectus forms a part, no further options will be granted
    under our 2007 option plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">2009
    Stock Plan</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our 2009 stock plan has been approved by our board of directors
    and stockholders and will become effective as of the time the
    registration statement of which this prospectus forms is
    declared effective by the SEC. An aggregate of
    30,000,000&#160;shares of our common stock are reserved for
    issuance under the 2009 option plan. As of the date of this
    prospectus, no options or other awards have been granted under
    our 2009 option plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Shares Available for Awards.</I>&#160;&#160;The total number
    of shares of our common stock that may be subject to awards
    under our 2009 option plan is 30,000,000&#160;shares, plus the
    number of shares with respect to which awards previously granted
    thereunder are forfeited, expire, terminate without being
    exercised or are settled with property other than shares, and
    the number of shares that are surrendered in payment of any
    awards or any tax withholding requirements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Eligibility.</I>&#160;&#160;The persons eligible to receive
    awards under our 2009 option plan are our officers, directors,
    employees and independent contractors who render consulting or
    advisory services to us and those of our subsidiaries. An
    employee on leave of absence may be considered as still in our
    employ or in the employ of one of our subsidiaries for purposes
    of eligibility for participation in our 2009 option plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Administration.</I>&#160;&#160;Our 2009 option plan provides
    that it shall be administered by our board of directors or a
    committee appointed by our board of directors, which committee
    shall be constituted to comply with applicable laws. The party
    administering our 2009 option plan, whether it is our board of
    directors or a committee appointed by our board of directors, is
    referred to under the 2009 option plan as the
    &#147;administrator&#148;. Subject to the terms of our 2009
    option plan, the administrator is authorized to select eligible
    persons to receive awards, determine the type and number of
    awards to be granted and the number of shares of our common
    stock to which awards will relate, specify times at which awards
    will be exercisable or settleable (including performance
    conditions that may be required as a condition thereof), set
    other terms and conditions of awards, prescribe forms of award
    agreements, interpret and specify rules and regulations relating
    to our 2009 option plan and make all other determinations that
    may be necessary or advisable for the administration of our 2009
    option plan. Our board of directors has designated the
    compensation committee of the board to act as the administrator
    of our 2009 option plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stock Options.</I>&#160;&#160;The administrator is authorized
    to grant stock options, including both incentive stock options
    or ISOs, which can result in potentially favorable tax treatment
    to the participant, and nonstatutory stock options. The exercise
    price per share subject to an option is determined by the
    administrator, but in the case of an ISO must not be less than
    the fair market value of a share of our common stock on the date
    of grant and in the case of a nonstatutory stock option must not
    be less than 85% of the fair market value of a share of our
    common stock on the date of grant provided that if stock options
    are granted within 90&#160;days of a distribution by way of
    prospectus, the exercise price must not be less than the
    offering price under the prospectus. For purposes of our 2009
    option plan, the term &#147;fair market value&#148; means, as of
    any date, the value of our common stock determined as follows:
    (1)&#160;if our common stock is listed on any established stock
    exchange or a national market system, its fair market value
    shall be
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    the closing sales price for such stock (or the closing bid, if
    no sales were reported) as quoted on such exchange or system on
    the day prior to the date of grant, as reported in The Wall
    Street Journal or such other source as the administrator deems
    reliable; (2)&#160;if our common stock is regularly quoted by a
    recognized securities dealer but selling prices are not
    reported, its fair market value shall be the mean between the
    high bid and low asked prices for our common stock on the day of
    determination; or (3)&#160;in the absence of an established
    market for our common stock, the fair market value thereof shall
    be determined in good faith by the administrator. The maximum
    term of each option, the times at which each option will be
    exercisable, and provisions requiring forfeiture of unexercised
    options at or following termination of employment or service
    generally are fixed by the administrator except that no option
    may have a term exceeding ten years. The exercise price for
    stock options shall be paid using such method of payment as
    shall be determined by the administrator, including, without
    limitation: (1)&#160;cash, (2)&#160;check, or (3)&#160;any
    combination of the foregoing methods of payment. Grants of stock
    options are subject to the limitation that, in any 12&#160;month
    period, no individual may receive options to purchase shares of
    our common stock in excess of 5% of the number of shares of our
    common stock then outstanding and no individual who is a
    consultant or engaged in investor relations activities may
    receive options to purchase shares of our common stock in excess
    of 2% of the number of shares of our common stock then
    outstanding.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stock Purchase Rights.</I>&#160;&#160;The administrator is
    authorized to grant stock purchase rights. A stock purchase
    right is an award that entitles the participant to purchase
    shares of our common stock. The terms, conditions, and
    restrictions related to grants of stock purchase rights are
    determined by the administrator, provided that all such terms,
    conditions, and restrictions must comply with the Delaware
    General Corporation Law and the requirements of any stock
    exchange on which shares of our common stock may be listed.
    Stock purchase rights are exercised by execution of a restricted
    stock purchase agreement in the form determined by the
    administrator.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Restricted Stock Units.</I>&#160;&#160;The administrator is
    authorized to grant restricted stock units. A restricted stock
    unit is an award that entitles the participant to receive shares
    of our common stock if certain vesting criteria are met. The
    vesting criteria and any other terms, conditions, and
    restrictions related to grants of restricted stock units are
    determined by the administrator.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Adjustment of Shares.</I>&#160;&#160;In the event that we
    have a specified type of change in our capital structure, such
    as a stock split, stock dividend, recapitalization, spin-off,
    reclassification or similar occurrence, then the administrator
    must appropriately adjust the number of shares reserved under
    the 2009 option plan, as well as the numbers of shares covered
    by each outstanding award and the exercise prices or purchase
    prices, if applicable, of all outstanding stock awards under the
    2009 option plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Other Terms of Awards.</I>&#160;&#160;The administrator may
    institute an exchange program which is a program under which
    (1)&#160;outstanding awards are surrendered or cancelled in
    exchange for awards of the same type (which may have lower
    exercise prices and different terms), awards of a different
    type, <FONT style="white-space: nowrap">and/or</FONT>
    cash, <FONT style="white-space: nowrap">and/or</FONT>
    (2)&#160;the exercise price of an outstanding award is reduced,
    but subject to such approvals as may be required by any stock
    exchange on which shares of our common stock may be listed. The
    terms and conditions of any exchange program will be determined
    by the administrator in its sole discretion. The administrator
    may to allow participants to satisfy withholding tax obligations
    by electing to have the Company withhold from the shares of our
    common stock to be issued upon exercise of an award that number
    of shares of common stock having a fair market value equal to
    the minimum amount required to be withheld. Awards may not be
    sold, pledged, assigned, hypothecated, transferred, or disposed
    of in any manner other than by will or the laws of descent and
    distribution, and may be exercised during the lifetime of the
    participant, only by the participant. Awards under our 2009
    option plan are generally granted without a requirement that the
    participant pay consideration in the form of cash or property
    for the grant (as distinguished from the exercise), except to
    the extent required by law. The administrator may, however,
    grant awards in exchange for other awards under our 2009 option
    plan awards or under our other plans, or other rights to payment
    from us, and may grant awards in addition to and in tandem with
    such other awards, rights or other awards.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Acceleration of Vesting; Change in
    Control.</I>&#160;&#160;The administrator may, in its
    discretion, but subject to such approvals as may be required by
    any stock exchange on which shares of our common stock may be
    listed, accelerate the exercisability, the lapsing of
    restrictions or the expiration of vesting periods of any award.
    In the event of a merger of the Company with or into another
    corporation, or a &#147;change in control&#148; of the Company,
    as defined in our 2009 option plan, each outstanding award shall
    be assumed or an equivalent award substituted by the successor
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    corporation or a parent or subsidiary of the successor
    corporation. In the event that the successor corporation refuses
    to assume or substitute for the award, the participant will
    fully vest in and have the right to exercise all of his or her
    outstanding options and stock purchase rights, including shares
    of our common stock as to which such awards would not otherwise
    be vested or exercisable, all restrictions on restricted stock
    will lapse, and all outstanding restricted stock units will
    fully vest. In addition, the administrator may provide in an
    award agreement that the performance goals relating to any
    performance based award will be deemed to have been met upon the
    occurrence of any change in control.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Amendment and Termination.</I>&#160;&#160;Our board of
    directors may amend, alter, suspend, or terminate our
    2009&#160;option plan at any time without further stockholder
    approval, except stockholder approval must be obtained for any
    amendment or alteration if such approval is required by law or
    regulation or under the rules of any stock exchange or quotation
    system on which shares of our common stock are then listed or
    quoted. Thus, stockholder approval may not necessarily be
    required for every amendment to our 2009 option plan which might
    increase the cost of our 2009&#160;option plan or alter the
    eligibility of persons to receive awards. Stockholder approval
    will not be deemed to be required under laws or regulations,
    such as those relating to ISOs, that condition favorable
    treatment of participants on such approval, although our board
    of directors may, in its discretion, seek stockholder approval
    in any circumstance in which it deems such approval advisable.
    Unless earlier terminated by our board of directors, our 2009
    option plan shall continue in effect for a term of ten years
    from the later of (1)&#160;the effective date of our
    2009&#160;option plan, or (2)&#160;the earlier of the most
    recent board of directors or stockholder approval of an increase
    in the number of shares of our common stock reserved for
    issuance under our 2009 option plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">2009
    Non-Employee Directors&#146; Stock Option Plan</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our 2009 Non-Employee Directors&#146; Stock Option Plan has been
    approved by our board of directors and stockholders and will
    become effective as of the time the registration statement of
    which this prospectus forms is declared effective by the SEC.
    Throughout this prospectus we refer to the plan as our
    2009&#160;directors&#146; plan. An aggregate of
    7,000,000&#160;shares of our common stock are reserved for
    issuance under the 2009&#160;directors&#146; plan. As of the
    date of this prospectus, no options or other awards have been
    granted under our 2009&#160;directors&#146; plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Shares Available for Awards.</I>&#160;&#160;The total number
    of shares of our common stock that may be subject to awards
    under our 2009&#160;directors&#146; plan is
    7,000,000&#160;shares, plus the number of shares with respect to
    which awards previously granted thereunder are forfeited,
    expire, terminate without being exercised or are settled with
    property other than shares, and the number of shares that are
    surrendered in payment of any awards or any tax withholding
    requirements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Eligibility.</I>&#160;&#160;The persons eligible to receive
    awards under our 2009&#160;directors&#146; plan are members of
    our board of directors who are not employed by us or any of our
    subsidiaries.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Administration.</I>&#160;&#160;Our 2009&#160;directors&#146;
    plan provides that it shall be administered by our board of
    directors and that the board of directors may not delegate
    administration of the plan to a committee. Subject to the terms
    of the plan, our board of directors is authorized to determine
    the provisions of each stock option granted pursuant to the
    2009&#160;directors&#146; plan and to construe and interpret the
    plan and stock options granted under it, and to establish, amend
    and revoke rules and regulations for its administration.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Stock Options.</I>&#160;&#160;Only nonstatutory stock options
    may be granted under the 2009&#160;directors&#146; plan.
    Furthermore, pursuant to the plan, options may only be granted
    to members of our board of directors who are not employed by us
    or any of our subsidiaries. The granting of nonstatutory stock
    options to our non-employee directors is non-discretionary and
    occurs automatically as follows: (1) (i)&#160;each person who is
    or becomes a non-employee director as of the effective date of
    the plan, and (ii)&#160;each person who, after the effective
    date, is elected or appointed for the first time to be a
    non-employee director automatically shall, upon the effective
    date or the date of his or her initial election or appointment
    to be a non-employee director, as applicable, be granted an
    &#147;initial grant&#148; to purchase 300,000&#160;shares of our
    common stock; and (2)&#160;on the date of the annual meeting of
    our stockholders, each person who is elected as a non-employee
    director at that annual meeting (other than directors who have
    been elected directors for the first time at that annual meeting
    or have not served for at least 18&#160;months), automatically
    shall receive an &#147;annual grant&#148; to purchase
    150,000&#160;shares of our common stock on the terms and
    conditions set forth in the plan, provided, however, that the
    number of shares subject to an annual grant for a particular
    non-employee
</DIV>

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<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    director shall be reduced, on a pro rata basis, for each month
    such person did not serve as a non-employee director during the
    <FONT style="white-space: nowrap">12-month</FONT>
    period from the prior annual grant date (or from the date of the
    closing of this offering with respect to the first annual grant
    hereunder) until the current annual grant date. One half of the
    shares of common stock covered by an initial grant shall vest
    immediately and the other one half shall vest monthly over
    12&#160;months. The shares of common stock covered by an annual
    grant shall vest monthly over 12&#160;months. The exercise price
    per share subject to an option shall be the fair market value of
    a share of our common stock on the date of grant provided that
    if stock options are granted within 90&#160;days of a
    distribution by way of prospectus, the exercise price must not
    be less than the offering price under the prospectus. For
    purposes of our 2009&#160;directors&#146; plan, the term
    &#147;fair market value&#148; means, as of any date, the value
    of our common stock determined as follows: (1)&#160;if our
    common stock is listed on any established stock exchange or a
    national market system, its fair market value shall be the
    closing sales price for such stock (or the closing bid, if no
    sales were reported) as quoted on such exchange or system on the
    day prior to the date of grant, as reported in The Wall Street
    Journal or such other source as our board of directors deems
    reliable; or (2)&#160;in the absence of an established market
    for our common stock, the fair market value thereof shall be
    determined in good faith by the board of directors. No stock
    option shall be exercisable after the expiration of ten years
    from the date it was granted. The exercise price for stock
    options granted under our 2009&#160;directors&#146; plan shall
    be paid by (1)&#160;cash, (2)&#160;check or (3)&#160;any
    combination of the foregoing methods of payment. Stock options
    granted under the 2009&#160;directors&#146; plan shall terminate
    the earlier of three months (six months if the termination is a
    result of the option holder&#146;s disability (as defined in the
    2009&#160;directors&#146; plan) or 12&#160;months if the
    termination is a result of the option holder&#146;s death)
    following the termination of an option holder&#146;s continuous
    service as a director or the expiration of the term of the stock
    option as set forth in the option holder&#146;s option agreement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Adjustment of Shares.</I>&#160;&#160;In the event that we
    have a specified type of change in our capital structure, such
    as a stock split, stock dividend, recapitalization, spin-off,
    reclassification or similar occurrence, then the board of
    directors must appropriately adjust the number of shares
    reserved under the 2009&#160;directors&#146; plan, as well as
    the numbers of shares covered by each outstanding award and the
    exercise prices or purchase prices, if applicable, of all
    outstanding stock awards under the 2009&#160;directors&#146;
    plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Other Terms of Awards.</I>&#160;&#160;Option holders may
    satisfy withholding tax obligations by electing to have us
    withhold from the shares of our common stock to be issued upon
    exercise of an award that number of shares of common stock
    having a fair market value equal to the minimum amount required
    to be withheld. Stock options may not be sold, pledged,
    assigned, hypothecated, transferred, or disposed of in any
    manner other than by will or the laws of descent and
    distribution, and may be exercised during the lifetime of the
    participant, only by the participant. Upon exercise of any stock
    option , an option holder may not sell, dispose of, transfer,
    make any short sale of, grant any option for the purchase of, or
    enter into any hedging or similar transaction with the same
    economic effect as a sale, any shares of our common stock or our
    other securities held by the option holder, for a period of time
    specified by the managing underwriter (not to exceed one hundred
    eighty (180)&#160;days) following the effective date of any
    registration statement that we may file under the Securities
    Act, other than a
    <FONT style="white-space: nowrap">Form&#160;S-8</FONT>
    registration statement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Early Exercise; Change in Control.</I>&#160;&#160;If
    permitted by the rules of any stock exchange on which shares of
    our common stock may be listed, <B>t</B>he board of directors
    may, in its discretion, give an option holder the right to
    exercise his or her option as to any part or all of the shares
    of our common stock subject to the stock option prior to full
    vesting of the stock option. In the event that we undergo a
    &#147;change in control,&#148; as defined in our
    2009&#160;directors&#146; plan, and as of, or within
    12&#160;months after, the effective time of such change in
    control, an option holder&#146;s continuous service with us or
    any of our subsidiaries terminates, then his or her stock
    options will accelerate and become fully vested and immediately
    exercisable, unless the termination was a result of the option
    holder&#146;s resignation (other than any resignation
    contemplated by the terms of the change in control or required
    by us or the acquiring entity pursuant to the change in
    control). Our 2009&#160;directors&#146; plan provides for a
    &#147;reduced payment&#148; (as defined in the plan) to an
    option holder in the event that the acceleration of the vesting
    and exercisability of the stock options provided for in
    subsection 11(c) of the plan and benefits otherwise payable to
    an option holder would (1)&#160;constitute a &#147;parachute
    payment&#148; within the meaning of Section&#160;280G of the
    Code, and (2)&#160;but for this sentence, be subject to the
    excise tax imposed by Section&#160;4999 of the Code
</DIV>

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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>Amendment and Termination.</I>&#160;&#160;Our board of
    directors may amend, alter, suspend, or terminate our
    2009&#160;directors&#146; plan at any time. However, except as
    provided in Section&#160;11 of the plan relating to adjustments
    upon changes in our common stock, no amendment shall be
    effective unless approved by our stockholders to the extent
    stockholder approval is necessary to satisfy the requirements of
    <FONT style="white-space: nowrap">Rule&#160;16b-3</FONT>
    or any <FONT style="white-space: nowrap">TSX-V</FONT>
    or other securities exchange listing requirements. The
    2009&#160;directors&#146; plan does not have a set termination
    date. Our board of directors may terminate the
    2009&#160;directors&#146; plan at any time.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Incentive
    Bonus Plan</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors has adopted an incentive bonus plan under
    which Paul J. Travers, our Chief Executive Officer and
    President, and Grant Russell, our Chief Financial Officer and
    Executive Vice President, may be awarded cash bonuses based upon
    increases in our sales and improvements in our profitability in
    2009 compared to 2008.&#160;Under the plan, Mr.&#160;Travers
    will be entitled to a cash bonus of 0.50% of his base salary for
    each 1.0% increase in our sales and Mr.&#160;Russell will be
    entitled to a cash bonus of 0.35% of his base salary for each
    1.0% increase in our sales, provided however, that no bonus
    shall be paid unless our sales increase by at least 20%, the
    amount paid for increases in our sales to Mr.&#160;Travers shall
    not exceed 100% of his base salary and the amount paid to
    Mr.&#160;Russell shall not exceed 70% of his base salary.
    Additionally, but only if our 2009 sales are equal to or greater
    than our 2008&#160;sales, Mr.&#160;Travers and Mr.&#160;Russell
    will each be entitled to a bonus of 15% of their respective base
    salaries if our operating loss for 2009 is less than
    $1.0&#160;million or a bonus of 30% of their respective base
    salaries if our operating income for 2009 is more than zero but
    less than 3% of our sales for 2009. If our operating income for
    2009 is more than 3% of our sales for 2009, Mr.&#160;Travers and
    Mr.&#160;Russell will each be entitled to an additional cash
    bonus based upon the our 2009 operating income as a percentage
    of our 2009 sales. In Mr.&#160;Traver&#146;s case, the bonus
    will be determined by multiplying his base salary by 10 times
    our 2009 operating income expressed as a percentage of our 2009
    sales. In Mr.&#160;Russell&#146;s case, the bonus will be
    determined by multiplying his base salary by 7.5 times our
    2009&#160;operating income expressed as a percentage of our 2009
    sales. However, the amount paid to Mr.&#160;Travers shall not
    exceed 100% of his base salary and the amount paid to
    Mr.&#160;Russell shall not exceed 75% of his base salary.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Other
    Benefits</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We believe establishing competitive benefit packages for our
    employees is an important factor in attracting and retaining
    highly qualified personnel. Executive officers are eligible to
    participate in all of our employee benefit plans, such as
    medical, dental, vision, group life and accidental death and
    dismemberment insurance and our 401(k) plan, in each case on the
    same basis as other employees. While our 401(k) plan does permit
    us to make discretionary contributions and matching
    contributions, subject to established limits and a vesting
    schedule, we have not made any discretionary or matching
    contributions to the plan on behalf of any participating
    employees since its inception in 2007.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Perquisites</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, we do not provide significant perquisites to our
    employees. As a result, the cost to us of any perquisites is
    minimal. We reimburse our President and Chief Executive Officer
    and our Chief Financial Officer for the costs of an automobile
    at the rate of $750 per month. We also provide our Chief
    Financial Officer, whose primary residence is in Vancouver,
    British Columbia, the option to receive portions of his regular
    salary as a housing allowance at the rate prescribed by the
    Internal Revenue Service, for the maintenance of a part-time
    residence in Rochester, New York. Payment of such allowance is
    deductible by us for federal income tax purposes in the same
    manner as compensation. We also reimburse the costs of our Chief
    Financial Officer&#146;s flights that are direct to and from his
    residence in Vancouver Canada and Rochester, New York.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The board of directors or its compensation committee may at any
    time choose not to implement, amend, suspend, discontinue or
    terminate the annual incentive or profit sharing plan.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    69
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Outstanding
    Equity Awards at Fiscal Year End</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth information concerning
    exercisable and unexercisable options and stock awards that has
    not vested for each of the named executive officers that is
    outstanding as of December&#160;31, 2008. We have not granted
    any stock awards.
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">OUTSTANDING
    EQUITY AWARDS AT FISCAL YEAR-END</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="39%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="18" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Option Awards</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Equity<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Incentive Plan<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Awards:<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Securities<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Securities<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Securities<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Underlying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Underlying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Underlying<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Unexercised<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Unexercised<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Unexercised<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Options<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Options<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Unearned<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Exercise<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(#)<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(#)<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Options<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Price<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Expiration<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Exercisable</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Unexercisable</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(#)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Date</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Paul Travers
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    188,576
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.00875
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9/03/12
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,485,232
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.02599
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1/03/13
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Grant Russell
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    174,256
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.00875
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9/03/12
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Options
    to Purchase Securities</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following chart sets out, as at the date of this prospectus,
    information regarding outstanding options to purchase shares of
    our common stock which have been granted to our directors,
    executive officers, employees, consultants, past directors,
    executive officers, employees and consultants.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 7pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="39%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="6%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="5%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="13%">&nbsp;</TD>	<!-- colindex=04 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="15%">&nbsp;</TD>	<!-- colindex=05 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="5%">&nbsp;</TD>	<!-- colindex=06 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=08 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=08 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 6pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Market Value<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Securities<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>of Common<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Under<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Exercise<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares on Date<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Relationship to the Corporation</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Options(1)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Option</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Grant Date</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Expiry Date(2)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Price(3)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>of Grant</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    All directors and past directors of Vuzix (4&#160;individuals in
    total)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3,365,224
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    common<BR>
    stock
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    November 1, 2001<BR>
    to May 1, 2009
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    November 1, 2011<BR>
    to May 1, 2019
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    $0.0608
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    (4
</TD>
<TD nowrap align="left" valign="top">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    All executive officers and past executive officers of Vuzix (3
    individuals in total&#160;&#151; all included in the above
    grouping also)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    2,222,320
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    common<BR>
    stock
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    September 3, 2002<BR>
    to May 1, 2009
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    September 3, 2002<BR>
    to May 1, 2019
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    $0.0355
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    (4
</TD>
<TD nowrap align="left" valign="top">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    All other employees or past employees of Vuzix (48 individuals
    in total)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    8,973,642
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    common<BR>
    stock
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    September 30, 2000<BR>
    to May 1, 2009
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    September 30, 2010 to<BR>
    May 1, 2019
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    $0.1373
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    (4
</TD>
<TD nowrap align="left" valign="top">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    All consultants and past consultants of Vuzix
    (24&#160;individuals in total)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    6,821,587
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    common<BR>
    stock
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    March 30, 2000<BR>
    to May 1, 2009
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    June 30, 2009 to<BR>
    May 1, 2019
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    $0.1539
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    (4
</TD>
<TD nowrap align="left" valign="top">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Other (none)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    &#151;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    &#151;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    &#151;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    &#151;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    &#151;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    &#151;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=60 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Represents the aggregate number of shares issuable upon exercise
    of all outstanding options and warrants held by the group.
    Except for warrants exercisable to purchase an aggregate of
    3,855,899&#160;shares of our common stock held by our current
    and former consultants, all the securities disclosed in this
    table are options granted under our 2007 plan.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    All options granted under our 2007 plan expire ten years from
    the date of grant. Warrants expire between two and five years
    from the date of issuance with a weighted average remaining term
    of 0.99&#160;years.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    Represents the weighted average exercise price of all
    outstanding options and warrants held by the members of the
    group. Individual exercise prices range: (i)&#160;for directors,
    from $0.0088 to $0.2334; (ii)&#160;for executive officers, from
    $0.0088 to $0.1500; (iii)&#160;for employees, from $0.0061 to
    $0.2334; and (iv)&#160;for consultants, from $0.0061 to $0.2333.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (4) </TD>
    <TD></TD>
    <TD valign="bottom">
    All options and warrants are exercisable at the fair market
    value of our common stock as of the date of grant as determined
    by our board of directors.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    70
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Potential
    Payments upon Termination or Change in Control</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into an agreement with each of Paul Travers and
    Grant Russell that would require us to provide compensation to
    them in the event of a termination of employment or a change in
    control. See &#147;Employment Agreements&#148; above.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Their employment agreements entitle them to severance payments
    upon their termination by us other than for &#147;cause&#148;
    (as defined in the agreement) or by them for &#147;good
    reason&#148; (as defined in the agreement) or upon their death
    or &#147;disability&#148; (as defined in the agreement). Under
    the agreements: (a)&#160;we shall have &#147;cause&#148; to
    terminate them as a result of their: (i)&#160;willfully engaging
    in conduct which is materially injurious to us;
    (ii)&#160;willful fraud or material dishonesty in connection
    with their performance as an employee; (iii)&#160;deliberate or
    intentional failure to substantially perform their duties as
    employees that results in material harm to us; or
    (iv)&#160;conviction for, or plea of <I>nolo contendere </I>to a
    charge of, commission of a felony; (b)&#160;they shall have
    &#147;good reason&#148; to terminate their employment upon:
    (i)&#160;a material diminution during the term of the agreements
    in their duties, responsibilities, position, office or title;
    (ii)&#160;a breach by us of the compensation and benefits
    provisions of their agreements; (iii)&#160;a material breach by
    us of any other terms of their agreements; or (iv)&#160;the
    relocation of their principal place of business at our request
    beyond 30&#160;miles from its current location; and
    (c)&#160;they shall be deemed to be &#147;disabled&#148; if they
    shall be rendered incapable of performing their duties to us by
    reason of any medically determined physical or mental impairment
    that can be expected to result in death or that can reasonably
    be expected to last for a period of either (i)&#160;six or more
    consecutive months from the first date of their absence due to
    the disability or (ii)&#160;nine months during any
    <FONT style="white-space: nowrap">12-month</FONT>
    period. Any termination by us for cause or by them for good
    reason is subject to a
    <FONT style="white-space: nowrap">30-day</FONT>
    notice period and opportunity to cure.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the event that their employment is terminated by us other
    than for cause, by them for good reason or upon their death or
    disability, Mr.&#160;Travers and Mr.&#160;Russell shall be
    entitled to be paid, in addition to any base salary and bonuses
    then accrued and unpaid, and their then current base salary for
    24&#160;months after the date of termination and the entire
    bonus that would have been payable pursuant to any agreement,
    understanding, arrangement or plan in which he is entitled to
    participate for the year in which the termination of his
    employment occurred as if they had been employed for the entire
    year, provided that, in the opinion of the board of directors,
    they are likely to have met any bonus plan goals for the
    relevant period had they not been terminated. As a condition to
    our obligation to make any such payment, we, in our sole
    discretion, may require Mr.&#160;Travers and Mr.&#160;Russell to
    release us and our officers, directors, employees, and agents,
    from any and all claims and causes of action, including, but not
    limited to those arising from their employment and the
    termination of their employment. In the event of such
    termination, all stock options, restricted stock grants, stock
    appreciation rights and other similar awards held by them at the
    date of termination shall immediately vest, the period during
    which any options or rights relating to such grants may be
    exercised shall be the longer of the date specified in such
    grants or the date that is thirty (30)&#160;days after the end
    of the
    <FONT style="white-space: nowrap">24-month</FONT>
    period following the date of termination and will, in all other
    respects, continue to be governed by, and continued in
    accordance with, their applicable plan and grant documents.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under their employment agreements, &#147;change of control&#148;
    means: (i)&#160;the approval by our stockholders, and the
    completion of the transaction resulting from such approval, of
    (A)&#160;the sale or other disposition of all or substantially
    all our assets or (B)&#160;our complete liquidation or
    dissolution; (ii)&#160;the sale, in a single transaction or in a
    series of related transactions, of all or substantially all of
    the outstanding shares of our capital stock; (iii)&#160;the
    approval by our stockholders, and the completion of the
    transaction resulting from such approval, of a merger,
    consolidation, reorganization or similar corporate transaction,
    whether or not we are the surviving corporation in such
    transaction, in which the outstanding shares of common stock are
    converted into (A)&#160;shares of stock of another company,
    other than a conversion into shares of voting common stock of
    the successor corporation (or a holding company thereof)
    representing fifty percent (50%) or more of the voting power of
    all capital stock thereof outstanding immediately after the
    merger or consolidation or (B)&#160;other securities (either
    ours or those of another company) or cash or other property;
    (iv)&#160;pursuant to an affirmative vote of a holder or holders
    of seventy five percent (75%) of our capital stock of the
    entitled to vote on such a matter, the removal of a majority of
    the individuals who are at that time members of the board of
    directors; or (v)&#160;the acquisition by any entity or
    individual of one hundred percent of our capital stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the event of a change of control, any unvested stock options
    held by Mr.&#160;Travers or Mr.&#160;Russell shall be fully
    vested and become immediately exercisable. Such options shall
    remain exercisable for the period remaining under
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    71
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    the relevant stock option agreement and shall not have a
    shortened period of exercisability as a result of the change of
    control, except for statutory stock options which shall, at
    their election, (i)&#160;expire 90&#160;days after their
    termination (or one year after their termination upon their
    death or permanent and total disability) or (ii)&#160;be
    converted into non-qualified stock options expiring at the end
    of the entire term of such option under the relevant stock
    option agreement. Additionally, if Mr.&#160;Travers or
    Mr.&#160;Russell is terminated within one year of a change of
    control for any reason other than by us for cause, or if they
    elect to terminate their employment (whether or not for good
    reason) after the expiration of 120&#160;days after and on or
    before the two-year anniversary of a change of control,
    Mr.&#160;Travers and Mr.&#160;Russell shall be entitled to be
    paid, in addition to any base salary and bonuses then accrued
    and unpaid, their then current base salary for 48&#160;months
    after the date of termination and the entire bonus that would
    have been payable pursuant to any agreement, understanding,
    arrangement or plan in which they are entitled to participate
    for the year in which the termination of their employment
    occurred as if they had been employed for the entire year,
    provided that, in the opinion of the board of directors, they
    are likely to have met any bonus plan goals for the relevant
    period had he not been terminated.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Compensation
    of Directors</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth information concerning the
    compensation for the fiscal year ended December&#160;31, 2008 of
    our directors and directors elect who are not also named
    executive officers:
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DIRECTOR
    COMPENSATION&#160;&#151; YEAR ENDED DECEMBER 31, 2008</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="34%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=08 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=08 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=08 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=08 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Fees<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Nonqualified<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Earned or<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Non-Equity<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Deferred<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Paid in<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Stock<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Option<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Incentive Plan<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Compensation<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>All Other<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Cash<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Awards<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Awards<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Compensation<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Earnings<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Compensation<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Total<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)(1)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>($)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Robert F. Mechur(2)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,081
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,081
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    William Lee(3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Frank Zammataro(4)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Kathryn Sayko(4)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Bernard Perrine(4)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=60 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    The amounts shown in this column represent the dollar amounts
    recognized for share-based compensation expense for financial
    statement reporting purposes for stock options granted in 2008
    and unvested stock options granted in prior years in accordance
    with Statement of Financial Accounting Standards No.&#160;123
    (revised 2004), <I>Share-Based Payment,</I> but without giving
    effect to estimated forfeitures related to service-based vesting
    conditions. The assumptions used to compute the fair value are
    disclosed in note&#160;18 (Stock-based Compensation Expense) to
    our audited financial statements for the fiscal year ended
    December&#160;31, 2008 included in this prospectus.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    Resigned from our board of directors in June 2009.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    Elected to our board of directors in June 2009.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD align="right" valign="top">
    (4) </TD>
    <TD></TD>
    <TD valign="bottom">
    Elected, and has agreed to serve, as a member of our board of
    directors upon the effectiveness of the registration statement
    of which this prospectus forms a part.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2008, no cash director fees were earned by or paid to any
    non-management member of the board of directors. Under our
    2009&#160;directors&#146; plan, on the date each director is
    first elected or otherwise validly appointed to our board of
    directors he or she will be granted an option to purchase
    300,000&#160;shares of our common stock at an exercise price per
    share equal to 100% of the fair market value of our common stock
    on the date of grant. These options will be 50% vested
    immediately on grant and the balance will vest ratably, on a
    monthly basis, over the next 12&#160;months. After two years of
    service, non-management directors will thereafter receive an
    annual grant of options to purchase an additional
    150,000&#160;shares of common stock at the fair market value as
    determined on the date of grant, which options will vest on
    December 31 in the year granted. In addition, each
    non-management director is reimbursed for ordinary expenses
    incurred in connection with attendance at such meetings. Our
    2007 option plan provided for each incoming director to be
    granted an option to purchase 250,000&#160;shares of our common
    stock and an
</DIV>

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    <BR>
    72
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    annual grant of 125,000&#160;shares of common stock. These
    grants were otherwise on the same terms and conditions as those
    under our 2009&#160;directors&#146; plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition to the above option grants, in the future to recruit
    and maintain qualified directors, we believe that we will likely
    have to begin paying annual retainers, board committee
    membership and board meeting fees. It is not expected that such
    fees will be paid to any directors who are paid full salaries
    and serve as officers of the Company.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Compensation
    Committee Interlocks and Insider Participation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2007 and 2008, Paul J. Travers, our President and Chief
    Executive Officer, participated in deliberations of our board of
    directors concerning executive compensation.
</DIV>
<A name='115'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">RELATED
    PARTY TRANSACTIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Since January&#160;1, 2006, we have entered into the following
    transactions in which our directors, executive officers or
    holders of more than 5% of our capital stock had or will have a
    direct or indirect material interest. The following transactions
    do not include compensation, termination and
    <FONT style="white-space: nowrap">change-in-control</FONT>
    arrangements, which are described under &#147;Management.&#148;
    We believe the terms obtained or consideration that we paid or
    received, as applicable, in connection with the transactions
    described below were comparable to terms available or the
    amounts that would be paid or received, as applicable, in
    arm&#146;s-length transactions. Except as described below, we
    are not aware, after enquiring with our directors and officers,
    of any material interest, direct or indirect, of any our
    directors, executive officers, principal stockholders, or any
    associate or affiliate thereof, in any transaction within the
    last three years, or in any proposed transaction, that has
    materially affected or will materially affect our company.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Officer
    Loan</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In October 2002, we entered into a stock purchase agreement with
    four of our employees, including Grant Russell, our Chief
    Financial Officer and Executive Vice President, pursuant to
    which they purchased an aggregate of 32,537,135&#160;shares of
    common stock at an aggregate purchase price of $276,566 or
    $0.0085 per share. Of these shares, Mr.&#160;Russell purchased
    8,339,644&#160;shares at an aggregate purchase price of $58,378.
    In order to finance the purchase of these shares, we loaned each
    employee an amount equal to the purchase price for the shares he
    purchased. Each loan was evidenced by a non-recourse promissory
    note and was secured by a pledge of the shares purchased. Each
    loan bore interest at the rate of 6% per annum, and all
    principal and interest was originally due and payable in
    September 2007. In September 2007, we extended the maturity date
    of each note until September 2012. In April 2009, we forgave the
    entire amount of Mr.&#160;Russell&#146;s indebtedness under this
    loan in payment of a one-time bonus in consideration of
    Mr.&#160;Russell&#146;s efforts in connection with this
    offering. At that time, the outstanding principal amount of the
    note payable by Mr.&#160;Russell together with all interest
    accrued thereon was $22,669. The aggregate outstanding principal
    amount of the notes payable by the employees other than
    Mr.&#160;Russell, together with all interest accrued thereon as
    of the date of this prospectus, was approximately $197,687.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Indemnification
    Agreements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into a standard form of indemnification
    agreement with each of our directors and executive officers.
    Under this agreement we are obligated to indemnify the
    indemnitee to the fullest extent permitted by applicable law for
    all reasonable expenses (including attorneys&#146; fees and
    disbursements), judgments, fines (including excise taxes and
    penalties) and amounts paid in settlement actually and
    reasonably incurred by the indemnitee arising out of or
    connected with the indemnitee&#146;s service as a director or
    officer and indemnitee&#146;s service in another capacity at our
    request or direction. We are also obligated to advance all
    reasonable and actual expenses incurred by the indemnitee in
    connection with any action, suit, proceeding or appeal with
    respect to which he is entitled to be indemnified upon our
    receipt of an invoice for such expenses. Our obligation to
    advance expenses is subject to the indemnitee&#146;s execution,
    upon our request, of an agreement to repay all such amounts it
    if is ultimately determined that he is not entitled to be
    indemnified by us under applicable law. If a claim for
    indemnification under this agreement may not be paid to the
    indemnitee under applicable law, then in any action in which we
    are jointly liable with the indemnitee, we are obligated to
    contribute to the amount of reasonable expenses (including
    attorneys&#146; fees and disbursements) actually and reasonably
    incurred by the indemnitee in proportion to the relative
</DIV>

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    <BR>
    73
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    benefits received by us and the indemnitee from the transaction
    from which such action arose, and our relative fault and that of
    the indemnitee in connection with the events which resulted in
    such expenses. The rights of an indemnitee under the form of
    indemnification agreement are in addition to any other rights
    that the indemnitee may have under our certificate of
    incorporation or bylaws, any agreement, or any vote of our
    stockholders or directors. We are not obligated to make any
    payment under the form of indemnification agreement to the
    extent payment is actually made to the indemnitee under an
    insurance policy or any other method outside of the agreement.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Related-Person
    Transactions Policy</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to our Code of Ethics and Business Conduct, all
    employees, officers and directors of ours and our subsidiaries
    are prohibited from engaging in any relationship or financial
    interest that is an actual or potential conflict of interest
    with us without prior approval. Employees are required to
    disclose any potential or actual conflicts with supervisors or
    our ethics compliance officer if one has been appointed by the
    board and otherwise directly to the members of our board of
    directors. Officers and directors are required to disclose any
    potential or actual conflicts to our board of directors.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors reviews and approves all transactions
    with directors, officers, and holders of five percent or more of
    our voting securities and their affiliates, or each, a related
    party. Prior to our board of directors&#146; consideration of a
    transaction with a related party, the material facts as to the
    related party&#146;s relationship or interest in the transaction
    are disclosed to our board of directors, and the transaction is
    not considered approved by our board of directors unless a
    majority of the directors who are not interested in the
    transaction approve the transaction. Further, when stockholders
    are entitled to vote on a transaction with a related party, the
    material facts of the related party&#146;s relationship or
    interest in the transaction are disclosed to the stockholders,
    who must approve the transaction in good faith.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    All future transactions between us and any of our officers and
    directors or their respective affiliates will be on terms
    believed by us to be no less favorable to us than are available
    from unaffiliated third parties. Such transactions, including
    any forgiveness of loans, will require prior approval by a
    majority of the members of our board who do not have an interest
    in the transaction who had access, at our expense, to our
    attorneys or independent legal counsel. We will not enter into
    any such transaction unless our disinterested independent
    directors or disinterested directors determine that the terms of
    such transaction are no less favorable to us than those that
    would be available to us with respect to such a transaction from
    unaffiliated third parties.
</DIV>
<A name='116'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CORPORATE
    GOVERNANCE</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Board of
    Directors</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors currently consists of two members: Paul
    J. Travers, our President and Chief Executive Officer, and Grant
    Russell, our Chief Financial Officer and Executive Vice
    President. William&#160;Lee, Frank Zammataro, Kathryn Sayko and
    Bernard Perrine have each been elected, and have agreed to
    serve, as a member of our board of directors subject to the
    effectiveness of the registration statement of which this
    prospectus forms a part. Our board has determined that each of
    our directors and directors elect other than Mr.&#160;Travers
    and Mr.&#160;Russell is, or will be upon the effective time of
    their election be, an independent director as defined by
    Rule&#160;5605(a)(2) of the NASDAQ Stock Market LLC (NASDAQ). We
    believe that, upon the effectiveness of the of the registration
    statement of which this prospectus forms a part, we will be
    compliant with the independence criteria for boards of directors
    under applicable laws and regulations, including NASDAQ
    Rule&#160;5605(a)(2). The board may meet independently of
    management as required. Although they are permitted to do so,
    the independent directors have not held regularly scheduled
    meetings at which non-independent directors and members of
    management are not in attendance.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Committees
    of the Board of Directors</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Subject to the effectiveness of the registration statement of
    which this prospectus forms a part, we have established an audit
    committee, a compensation committee and a nominating committee.
</DIV>

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    <BR>
    74
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Audit
    Committee</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the effectiveness of the of the registration statement of
    which this prospectus forms a part, our audit committee will
    consist of William Lee, Kathryn Sayko and Bernard Perrine, each
    of whom will then be a non-employee director. Mr.&#160;Lee will
    be the chairperson of our audit committee. Our board of
    directors has determined that each member designee of our audit
    committee will be an independent director as defined by NASDAQ
    Rule&#160;5605(a)(2) and will meet the requirements of financial
    literacy under SEC rules and regulations. Mr.&#160;Lee will
    serve as our audit committee financial expert, as defined under
    SEC rules.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our audit committee will be responsible for, among other things:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    selecting and hiring our independent auditors, and approving the
    audit and non-audit services to be performed by our independent
    auditors;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    evaluating the qualifications, performance and independence of
    our independent auditors;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    monitoring the integrity of our financial statements and our
    compliance with legal and regulatory requirements as they relate
    to financial statements or accounting matters;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    reviewing the adequacy and effectiveness of our internal control
    policies and procedures;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    discussing the scope and results of the audit with the
    independent auditors and reviewing with management and the
    independent auditors our interim and year-end operating
    results;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    preparing the audit committee report that the SEC requires in
    our annual proxy statement.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors has adopted a written charter for our
    audit committee, which will be available on our website upon the
    completion of this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Compensation
    Committee</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the effectiveness of the of the registration statement of
    which this prospectus forms a part, our compensation committee
    will consist of Kathryn Sayko, Bernard Perrine and Frank
    Zammataro, each of whom will then be a non-employee director.
    Ms.&#160;Sayko will be the chairperson of our compensation
    committee. Our board of directors has determined that each
    member designee of our compensation committee will be an
    independent director as defined by NASDAQ Rule&#160;5605(a)(2).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our compensation committee will be responsible for, among other
    things:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    reviewing and approving compensation of our executive officers
    including annual base salary, annual incentive bonuses, specific
    goals, equity compensation, employment agreements, severance and
    change in control arrangements, and any other benefits,
    compensations or arrangements;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    reviewing and recommending compensation goals, bonus and stock
    compensation criteria for our employees;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    reviewing and discussing annually with management our
    &#147;Compensation Discussion and Analysis&#148; disclosure
    required by SEC rules;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    preparing the compensation committee report required by the SEC
    to be included in our annual proxy statement;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    administering, reviewing and making recommendations with respect
    to our equity compensation plans.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors has adopted a written charter for our
    compensation committee, which will be available on our website
    upon the completion of this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Nominating
    Committee</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the effectiveness of the of the registration statement of
    which this prospectus forms a part, our nominating committee
    will consist of William Lee and Frank Zammataro, each of whom
    will then be a non-employee member of our board of directors.
    Mr.&#160;Zammataro will be the chairperson of our nominating
    committee.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    75
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors has determined that each member designee
    of our nominating committee will be an independent director as
    defined by NASDAQ 5605(a)(2).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our nominating committee will be responsible for, among other
    things:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    assisting our board of directors in identifying, interviewing
    and recruiting prospective director nominees;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    recommending director nominees;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    establishing and reviewing on an annual basis a process for
    identifying and evaluating nominees for our board of directors;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    annually evaluating and reporting to the our board of directors
    on the performance and effectiveness of the board of directors;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    recommending members for each board committee of our board of
    directors;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    annually presenting a list of individuals recommended for
    nomination for election to our board of directors at the annual
    meeting of our shareholders.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors has adopted a written charter for our
    nominating committee, which will be available on our website
    upon the completion of this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Canadian
    Governance Matters</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Generally</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Canadian Securities Administrators have published National
    Policy
    <FONT style="white-space: nowrap">58-201&#160;&#151;</FONT>
    Corporate Governance Guidelines. These instruments set out a
    series of guidelines and requirements for effective corporate
    governance and in this prospectus we refer to them collectively
    as the &#147;Guidelines.&#148; The Guidelines address matters
    such as the constitution and independence of corporate boards,
    the functions to be performed by boards and their committees and
    the effectiveness and education of board members.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Independence</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors has determined that each of our directors
    and directors elect other than Mr.&#160;Travers and
    Mr.&#160;Russell is, or will be upon the effective time of his
    or her election, independent for the purpose of National
    Instrument
    <FONT style="white-space: nowrap">58-101&#160;&#151;</FONT>
    Disclosure of Corporate Governance Practices.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Except as described below, our directors and hold no other
    directorships at the present time with other reporting issuers:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="70%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="28%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Director Name and Municipality of Residence</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Other Directorships</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    William Lee, Vancouver, British Columbia
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Tinka Resources Limited
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Halo Resources Ltd.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="bottom">
    Golden Peaks Resources Ltd.
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Orientation
    and Continuing Education</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our board of directors is responsible for the orientation and
    education of new members of the board and all new directors are
    provided with copies of our policies. Prior to joining the
    board, each new director will meet with our Chief Executive
    Officer. Our Chief Executive Officer is responsible for
    outlining our business and prospects, both positive and
    negative, with a view to ensuring that the new director is
    properly informed to commence his duties as a director. Each new
    director is also given the opportunity to meet with our auditors
    and counsel. As part of its annual self-assessment process, our
    board of directors determines whether any additional education
    and training is required for board members.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    76
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Ethical
    Business Conduct</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The directors encourage and promote a culture of ethical
    business conduct through communication and supervision as part
    of their overall stewardship responsibility. In addition, our
    board of directors has adopted a code of ethics and business
    conduct for our employees, officers and directors which
    addresses our continuing commitment to conducting business with
    highest integrity and in accordance with applicable laws, rules
    and regulations. Our code of ethics and business conduct
    establishes procedures that allow our directors, officers and
    employees to confidentially submit their concerns to our ethics
    officer or to our audit committee regarding questionable
    ethical, moral, accounting or auditing matters, without fear of
    retaliation. A copy of our code of ethics and business conduct
    will be available on our website and at www.sedar.com upon the
    completion of this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Nomination
    of Directors</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Historically, because of our size and stage of development and
    the limited number of directors, the entire board of directors
    has taken responsibility for nominating new directors and
    assessing current directors. As of the closing of this offering,
    nominees for election to our board of directors will be
    identified, interviewed and recruited by our nominating
    committee. For additional information about our nominating
    committee, see &#147;Corporate Governance&#160;&#151; Committees
    of the Board of Directors&#160;&#151; Nominating Committee&#148;
    above.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Compensation</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Historically, because of our size and stage of development and
    the limited number of directors, the compensation of our
    executive officers and directors was determined by our board of
    directors as a whole. As of the closing of this offering, our
    compensation committee will be responsible for reviewing and
    approving the compensation of our executive officers and
    directors and for reviewing and recommending compensation goals,
    bonus and stock compensation criteria for our employees. For
    additional information about our compensation committee, see
    &#147;Corporate Governance&#160;&#151; Committees of the Board
    of Directors&#160;&#151; Compensation Committee&#148; above.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Assessment</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Historically, because of our size and stage of development and
    the limited number of directors, our board of directors
    considered a formal assessment process to be inappropriate and
    evaluated its own effectiveness on an ad hoc basis. As of the
    closing of this offering, our nominating committee will be
    responsible for annually evaluating and reporting to our board
    of directors on the performance and effectiveness of the board
    as a whole, its committees and individual directors. For
    additional information about our nominating committee, see
    &#147;Corporate Governance&#160;&#151; Committees of the Board
    of Directors&#160;&#151; Nominating Committee&#148; above.
</DIV>
<A name='117'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth information regarding beneficial
    ownership of our common stock by:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    each of our named executive officers;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    each of our directors and directors elect;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    each person, or group of affiliated persons, known by us to
    beneficially own more than 5% of our common stock;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    all of our directors, directors elect and executive officers as
    a group.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    77
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="64%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>Percentage of Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Beneficially Owned</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Beneficially<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Before<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>After<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Name and Address of Beneficial Owner(1)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Owned(2)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Offering(3)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Offering(4)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Paul J. Travers
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    72,747,703
</TD>
<TD nowrap align="left" valign="bottom">
    (5)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    32.24
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#149;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Grant Russell
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,288,033
</TD>
<TD nowrap align="left" valign="bottom">
    (6)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5.45
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#149;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    William Lee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    300,000
</TD>
<TD nowrap align="left" valign="bottom">
    (8)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Frank Zammataro
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    175,000
</TD>
<TD nowrap align="left" valign="bottom">
    (7)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Kathryn Sayko
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    175,000
</TD>
<TD nowrap align="left" valign="bottom">
    (7)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Bernard Perrine
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    175,000
</TD>
<TD nowrap align="left" valign="bottom">
    (7)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Paul Churnetski
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    20,278,453
</TD>
<TD nowrap align="left" valign="bottom">
    (6)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9.06
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#149;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Directors, directors elect and executive officers as a group
    (6&#160;people)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    85,735,736
</TD>
<TD nowrap align="left" valign="bottom">
    (8)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    38.44
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#149;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=60 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96%"></TD>
</TR>

<TR>
    <TD valign="top">
    &#160;* </TD>
    <TD></TD>
    <TD valign="bottom">
    less than 1.0%</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    The address for each person is
    <FONT style="white-space: nowrap">c/o&#160;Vuzix</FONT>
    Corporation, 75 Town Centre Drive, Rochester, NY 14623.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    (2) </TD>
    <TD></TD>
    <TD valign="bottom">
    We have determined beneficial ownership in accordance with the
    rules of the SEC. These rules generally attribute beneficial
    ownership of securities to persons who possess sole or shared
    voting power or investment power with respect to those
    securities. In addition, the rules include shares of common
    stock issuable pursuant to the exercise of stock options or
    warrants, or the conversion of convertible promissory notes,
    that are either immediately exercisable or convertible, or that
    will become exercisable within 60&#160;days after the date of
    this prospectus. These shares are deemed to be outstanding and
    beneficially owned by the person holding those options, warrants
    or convertible promissory notes for the purpose of computing the
    percentage ownership of that person, but they are not treated as
    outstanding for the purpose of computing the percentage
    ownership of any other person. Unless otherwise indicated, the
    persons or entities identified in this table have sole voting
    and investment power with respect to all shares shown as
    beneficially owned by them, subject to applicable community
    property laws.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    (3) </TD>
    <TD></TD>
    <TD valign="bottom">
    The percentage of shares beneficially owned before the offering
    is based on 220,268,927&#160;shares of our common stock issued
    and outstanding as of the date of this prospectus.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    (4) </TD>
    <TD></TD>
    <TD valign="bottom">
    The percentage of shares beneficially owned after the offering
    is based on&#160;&#149;&#160;&#160;shares of our common stock
    issued and outstanding, including 9,312,899&#160;shares of
    common stock to be issued upon the conversion of both all our
    outstanding shares of Series&#160;C Preferred Stock, together
    with all accrued and unpaid dividends, and $75,000 in aggregate
    principal amount of convertible promissory notes, together with
    all accrued and unpaid interest
    and&#160;&#149;&#160;&#160;shares to be issued under our fiscal
    advisory fee agreement with the Canadian agents, and assumes no
    exercise of the agents&#146; overallotment option.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    (5) </TD>
    <TD></TD>
    <TD valign="bottom">
    Includes 1,673,808&#160;shares issuable upon exercise of options
    granted under our 2007 option plan.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    (6) </TD>
    <TD></TD>
    <TD valign="bottom">
    Includes 374,256&#160;shares issuable upon exercise of options
    granted under our 2007 option plan.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    (7) </TD>
    <TD></TD>
    <TD valign="bottom">
    Consists of shares issuable upon exercise of options granted
    under our directors&#146; plan, subject to the effectiveness of
    the registration statement of which this prospectus forms a
    part. Does not include an additional 125,000&#160;shares
    issuable upon exercise of option that will vest in equal monthly
    installments and will be fully vested on the first anniversary
    of the effective date of grant.</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    (8) </TD>
    <TD></TD>
    <TD valign="bottom">
    Includes (i)&#160;1,879,556&#160;shares issuable upon exercise
    of options granted under our 2007 option plan and
    (ii)&#160;700,000&#160;shares issuable upon exercise of options
    granted under our 2009&#160;directors&#146; plan, subject to the
    effectiveness of the registration statement of which this
    prospectus forms a part.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>
<A name='118'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">DESCRIPTION
    OF CAPITAL STOCK</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is a summary of the rights of our common stock and
    preferred stock. This summary is not complete. For more detailed
    information, please see our certificate of incorporation and
    bylaws, which are filed as exhibits to the registration
    statement of which this prospectus forms a part.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    78
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Common
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are authorized to issue up to 400,000,000&#160;shares of
    common stock, par value $0.001 per share. As of the date of this
    prospectus, 220,268,927&#160;shares of our common stock were
    issued and outstanding and held of record by 246 stockholders.
    The outstanding shares of our common stock are validly issued,
    fully paid and nonassessable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The holders of our common stock are entitled to vote upon all
    matters submitted to a vote of our stockholders and are entitled
    to one vote for each share of common stock held. Holders of our
    common stock are not entitled to cumulative voting on any
    matter, including in the election of directors. Subject to the
    rights and preferences, if any, applicable to shares of our
    preferred stock then outstanding, the holders of our common
    stock are entitled to receive ratably such dividends, payable in
    cash, stock or otherwise, as may be declared by our board of
    directors out of any funds legally available for the payment of
    dividends and distributions to the stockholders. See
    &#147;Dividend Policy.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the event of our voluntary or involuntary liquidation,
    dissolution or winding up, holders of our common stock are
    entitled to share ratably in all of our assets legally available
    for distribution after payment of our liabilities and
    distribution of the liquidation preference, if any, on our
    preferred stock then outstanding. Holders of our common stock
    have no preemptive or other subscription rights and no rights of
    conversion or redemption. The rights, preferences and privileges
    of holders of our common stock are subject to the rights of
    holders of any series of our preferred stock that may then be
    issued and outstanding.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Preferred
    Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date of this prospectus, we are authorized to issue up
    to 6,745,681&#160;shares of preferred stock, par value $0.001
    per share. Prior to the time the registration statement of which
    this prospectus forms a part becomes effective, the number of
    shares of preferred stock that we will be authorized to issue
    will be reduced to 5,000,000. The shares of our preferred stock
    may be issued in one or more series, and shall have such voting
    powers, full or limited, or no voting powers, and such
    designations, preferences and relative participating, optional
    or other special rights, and qualifications, limitations or
    restrictions thereof, as shall be stated and expressed in the
    resolution or resolutions providing for the issuance of such
    stock adopted from time to time by our board of directors. The
    board of directors is expressly vested with the authority to
    determine and fix in the resolution or resolutions providing for
    the issuances of any series of preferred stock the voting
    powers, designations, preferences and rights, and the
    qualifications, limitations or restrictions thereof, of each
    such series to the full extent now or hereafter permitted by the
    laws of the State of Delaware.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date of this prospectus, we have designated
    500,000&#160;shares of our preferred stock as Series&#160;C
    6%&#160;Convertible Preferred Stock (Series&#160;C Preferred
    Stock). As of that date, 168,500&#160;shares of our
    Series&#160;C Preferred Stock were issued and outstanding. We
    have agreed with the agents to use our best efforts to cause all
    of the outstanding shares of our Series&#160;C Preferred Stock,
    together with all dividends accrued and unpaid thereon, to be
    converted into common stock prior to the effective time of the
    registration statement of which this prospectus forms a part.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The outstanding shares of our preferred stock are validly
    issued, fully paid and nonassessable.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Series&#160;C
    Preferred Stock</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Holders of our Series&#160;C Preferred Stock are entitled to
    vote with the holders of our common stock, together as a single
    class, on all matters submitted to the vote of holders of our
    common stock. On each such matter, each holder of our
    Series&#160;C Preferred Stock is entitled to the number of votes
    equal to the number of whole shares of our common stock into
    which such holder&#146;s Series&#160;C Preferred Stock is then
    convertible. Holders of our Series&#160;C Preferred Stock are
    entitled to receive an annual cumulative dividend of $0.60 per
    share payable in cash out of the funds legally available
    therefor and are entitled to participate ratably on an as
    converted basis in any dividends paid on our common stock. In
    the event of our voluntary or involuntary liquidation,
    dissolution or winding up, prior to any distributions to holders
    of our common stock, the holders of our Series&#160;C Preferred
    Stock are entitled to receive out of the assets legally
    available for distribution $10.00 per share (subject to
    adjustment for stock splits, stock dividends, reorganizations,
    consolidations and similar changes) plus any accrued and unpaid
    dividends.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    79
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Each share of our Series&#160;C Preferred Stock is convertible
    at the option of the holder into that number of shares of our
    common stock equal to $10.00 divided by the conversion price
    then in effect. The initial conversion price of one preferred
    share for 30&#160;shares of common equaled $0.3333 per share was
    subject to adjustment for stock splits, dividends payable in
    capital stock, capital reorganizations or reclassifications of
    our capital stock and is now $0.2917 per share. All of the
    shares of Series&#160;C Preferred Stock plus any unpaid accrued
    dividends then outstanding were to automatically convert into
    shares of our common stock at the same rate upon the earlier of
    the election of the holders of 67% of the Series&#160;C
    Preferred Stock outstanding or the closing of a public offering
    of our common stock pursuant to a registration statement under
    the Securities Act in which the aggregate public offering price
    of our securities sold in the offering, before deduction of
    agents commissions and discounts, is at least $10,000,000.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our Series&#160;C Preferred Stock may be redeemed, at our
    option, at any time and from time to time and in whole or in
    part, upon written notice to the holder at a redemption price
    equal to $10.00 per share plus any accrued and unpaid dividends.
    The holders of our Series&#160;C Preferred Stock may exercise
    their conversion rights notwithstanding our delivery of a
    redemption notice until we have paid the redemption price.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have agreed with the agents to use our best efforts to cause
    all of the outstanding shares of our Series&#160;C Preferred
    Stock, together with all dividends accrued and unpaid thereon,
    to be converted into common stock prior to the effective time of
    the registration statement of which this prospectus forms a part.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Warrants</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date of this prospectus, warrants to purchase a total
    of 7,172,160&#160;shares of our common stock with a weighted
    average exercise price of $0.1815 per share were outstanding.
    Each warrant contains provisions for the adjustment of the
    exercise price and the number of shares issuable upon the
    exercise of the warrant in the event of certain stock dividends,
    stock splits, reorganizations, reclassifications and
    consolidations. In September&#160;2006, in consideration of a
    loan to us of $500,000, we issued the lender a warrant to
    purchase our common stock. The warrant is exercisable, upon
    conversion of the promissory note issued in evidence of the
    loan, to purchase the number of shares of our common stock equal
    to the principal amount of and accrued interest on the
    promissory note then converted divided by $0.5334, at an
    exercise price per share of $0.35. The warrant expires on
    September&#160;30, 2009. If the convertible promissory note,
    together with all accrued and unpaid interest thereon, had been
    converted on the date of this prospectus, 1,173,397&#160;shares
    of our common stock would have been issuable upon exercise of
    the warrant at the exercise price of $0.35 per share The shares
    of common stock issuable upon exercise of this warrant are
    included in the totals above. We intend to pay the outstanding
    principal amount of this note in full, together with all accrued
    and unpaid interest from the proceeds of this offering. If we do
    so, this warrant will terminate.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Options</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of The date of this prospectus, options to purchase
    15,304,554&#160;shares of common stock with a weighted average
    exercise price of $0.0999 per share were outstanding under our
    2007 option plan. Our board of directors has determined that no
    further options will be granted under our 2007 option plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date of this prospectus, no options were outstanding
    under our 2009 option plan. 30,000,000&#160;shares of our common
    stock are reserved for issuance under our 2009 option plan.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date of this prospectus, options to purchase
    1,200,000&#160;shares of common stock have been granted under
    our 2009&#160;directors&#146; plan, subject to the effectiveness
    of the registration statement of which this prospectus forms a
    part. 5,800,000 additional shares of our common stock are
    reserved for issuance under our 2009&#160;directors&#146; plan.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Convertible
    Debt</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In December 2001 and January 2002, we issued and sold
    convertible promissory notes in the aggregate principal amount
    of $15,000. Interest on outstanding principal amount of the
    notes accrues at the annual rate of 7.5%. The outstanding
    principal amount of the notes, together with all accrued and
    unpaid interest thereon, is convertible at the option of the
    holder into shares of our common stock at the adjusted current
    rate of $0.057089 per share. The outstanding principal amount of
    the notes together with all unpaid accrued interest thereon was
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    80
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    originally due and payable upon the consummation of our first
    equity financing after the date of issuance. We have agreed with
    the agents to use our best efforts to cause the entire
    outstanding principal amount of the notes, together with all
    unpaid accrued interest thereon, to be converted into shares of
    our common stock prior to the effective time of the registration
    statement of which this prospectus forms a part.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    From April 2002 through July 2002, we issued and sold
    convertible promissory notes in the aggregate principal amount
    of $60,000. Interest on outstanding principal amount of the
    notes accrues at the annual rate of 8.0%. The outstanding
    principal amount of the notes, together with all accrued and
    unpaid interest thereon, is convertible at the option of the
    holder into shares of our common stock at the rate of the lesser
    of (i)&#160;$0.30 per share; (ii)&#160;65% of the price at which
    shares of our common stock are offered to the public in the
    initial public offering of our common stock; or (iii)&#160;75%
    of the weighted average price per share at which we sell our
    common stock in the first offering after issuance of the notes
    that results in aggregate gross proceeds to us of at least
    $500,000. The outstanding principal amount of the notes together
    with all unpaid accrued interest thereon was originally due and
    payable on May&#160;31, 2004. We have agreed with the agents to
    use our best efforts to cause the entire outstanding principal
    amount of the notes, together with all unpaid accrued interest
    thereon, to be converted into shares of our common stock prior
    to the effective time of the registration statement of which
    this prospectus forms a part.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On September&#160;19, 2006, we borrowed $500,000 from an
    individual lender and issued a convertible promissory note in
    the principal amount of $500,000 in evidence of the loan.
    Interest on the outstanding principal amount of the note accrues
    at the annual rate of 10.0%. The outstanding principal amount of
    the note, together with all accrued and unpaid interest thereon,
    is convertible at the option of the holder into shares of our
    common stock at the rate of $0.2667 per share. The outstanding
    principal amount of the note together with all unpaid accrued
    interest thereon was due and payable on January&#160;31, 2009.
    As of January&#160;31, 2009, the interest accrued and unpaid on
    the note was $118,493. Since January&#160;31, 2009 interest on
    the principal amount of the note has accrued at the annual rate
    of 18.0% and we have made monthly payments of interest only. We
    intend to pay the outstanding principal amount of the note in
    full, together with all accrued and unpaid thereon, from the
    proceeds of this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Registration
    Rights</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In October 2000, we entered into a registration rights agreement
    with investors who purchased shares of our common stock in a
    private placement. Additional investors who purchased shares of
    our common stock in private placements closed in December 2000,
    January 2001 and September 2001 were subsequently joined as
    parties to the agreement. Under the agreement, if at any time
    after October&#160;11, 2002 our common stock is not listed for
    trading on a recognized stock market or exchange in the United
    States or Canada or on the OTC Bulletin&#160;Board, then upon
    the request of investors holding at least a majority of the
    shares of our common stock subject to the agreement we are
    obligated to file one registration statement covering the resale
    of such shares. We are required to bear all costs, other than
    underwriting discounts and commissions, related to any such
    registration. As of the date of this prospectus,
    2,720,000&#160;shares of our common stock are subject to the
    agreement. To date, no request for registration has been made by
    the holders of those shares.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In October 2000, we entered into a shareholders&#146; agreement
    with certain holders of our common stock. Under the agreement,
    we are obligated to give those shareholders the opportunity to
    include their shares of common stock in any registration
    statement filed by us under the Securities Act for purposes of
    effecting a public offering of our securities (including, but
    not limited to, registration statements relating to secondary
    offerings of our securities, but excluding registration
    statements relating to our initial public offering). If any
    shareholder decides not to include all of his shares in any
    registration statement filed by us, or if the number of shares
    that he is permitted to include in such registration statement
    is limited by the underwriter, that shareholder shall continue
    to have the right to include his shares in any registration
    statement we may subsequently file. We are required to bear all
    costs, other than underwriting discounts and commissions,
    related to any such registration. As of the date of this
    prospectus, 31,764,437&#160;shares of our common stock are
    subject to the agreement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In June 2005, we entered into a registration rights agreement
    with investors who purchased shares of our Series&#160;C
    Preferred Stock and warrants exercisable to purchase shares of
    our common stock in a private placement. Under the agreement, we
    are obligated to give those investors the opportunity to include
    the shares of common stock issuable upon conversion of their
    Series&#160;C Preferred Stock or upon exercise of their warrants
    in any registration of our common stock under the Securities Act
    other than our initial registered offering of shares to the
    public, a
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    81
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    registration in connection with a merger or other business
    combination transaction that has been consented in writing by
    the holders of the Series&#160;C Preferred Stock, or a
    registration relating to an employee benefit plan. We are
    required to bear all costs, other than underwriting discounts
    and commissions, related to any such registration. As of the
    date of this prospectus 7,060,914&#160;shares of our common
    stock are issuable upon conversion of the Series&#160;C
    Preferred Stock, together with all accrued and unpaid dividends
    thereon. All of the warrants issued in the private placement of
    our Series&#160;C Preferred Stock were exercised in 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In December 2005, pursuant to a technology acquisition agreement
    we entered into a rights agreement with New Light Industries,
    Ltd. in connection with our issuance to New Light of a warrant
    to purchase up to 1,428,571&#160;shares of our common stock.
    Under the agreement, we are obligated to give New Light the
    opportunity to include the shares of common stock issuable upon
    exercise of its warrants in any registration of our securities
    under the Securities Act other than a registration in connection
    with a merger or other business combination transaction or
    relating to an employee benefit plan or our first firm
    commitment underwritten public offering. We are required to bear
    all costs, other than underwriting discounts and commissions,
    related to any such registration. New Light has waived its
    registration rights with respect to this offering.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Rule&#160;144</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The holders of 46.9% of our outstanding common stock have owned
    their shares for more than one year, are not affiliated with us
    and, accordingly, are able to resell their shares to the public
    with regard to any volume limitations in accordance with
    Rule&#160;144 under the Act. In addition, 90&#160;days after the
    date of this prospectus our stockholders who have then held
    their shares for more than six months and are not affiliated
    with us will also be able to resell their shares to the public
    without regard to any volume limitations in accordance with
    Rule&#160;144 and our affiliates (which includes our officers
    and directors) who have held their shares for more than six
    months will be able to sell their shares to the public subject
    to certain volume and other restrictions contained in
    Rule&#160;144. The ability of our officers and directors and
    some of our stockholder to sell under Rule&#160;144 is subject
    the lock up agreements and
    <FONT style="white-space: nowrap">TSX-V</FONT> escrow
    arrangements described below. See &#147;Shares Eligible For
    Future Sale.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Delaware
    Anti-Takeover Law and Provisions of our Restated Certificate of
    Incorporation and Amended and Restated Bylaws</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Delaware
    Anti-Takeover Law.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As a result of this offering we may become subject to
    Section&#160;203 of the Delaware General Corporation Law.
    Section&#160;203 generally prohibits a Delaware corporation that
    has a class of voting stock that is listed on a &#147;national
    securities exchange&#148; or is held of record by more than
    2,000 stockholders from engaging in a &#147;business
    combination&#148; with an &#147;interested stockholder&#148; for
    a period of three years after the date of the transaction in
    which the person became an interested stockholder, unless it
    satisfies one of the following conditions:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    prior to the date of the transaction, the board of directors of
    the corporation approved either the business combination or the
    transaction that resulted in the stockholder becoming an
    interested stockholder;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the interested stockholder owned at least 85% of the voting
    stock of the corporation outstanding at the time the transaction
    commenced, excluding for purposes of determining the number of
    shares outstanding shares owned by persons who are directors and
    also officers and shares owned by employee stock plans in which
    employee participants do not have the right to determine
    confidentially whether shares held subject to the plan will be
    tendered in a tender or exchange offer; or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    on or subsequent to the date of the transaction, the business
    combination is approved by the board and authorized at an annual
    or special meeting of stockholders, and not by written consent,
    by the affirmative vote of at least
    66<FONT style="vertical-align: text-top; font-size: 70%;">2</FONT>/<FONT style="font-size: 70%;">3</FONT>%
    of the outstanding voting stock which is not owned by the
    interested stockholder.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For purposes of Section&#160;203, &#147;business
    combination&#148; includes:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any merger or consolidation involving the corporation and the
    interested stockholder;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    any sale, transfer, pledge or other disposition involving the
    interested stockholder of 10% or more of the assets of the
    corporation;
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    82
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    subject to exceptions, any transaction that results in the
    issuance or transfer by the corporation of any stock of the
    corporation to the interested stockholder;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    the receipt by the interested stockholder of the benefit of any
    loans, advances, guarantees, pledges or other financial benefits
    provided by or through the corporation.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, Section&#160;203 defines an &#147;interested
    stockholder&#148; as any entity or person beneficially owning
    15% or more of the outstanding voting stock of the corporation
    and any entity or person affiliated with or controlling or
    controlled by such entity or person.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Neither the
    <FONT style="white-space: nowrap">TSX-V</FONT> nor
    the OTC BB constitutes a &#147;national securities
    exchange&#148; for purposes of Section&#160;203. However, in the
    event that as a result of the offering our common stock is held
    of record by more than 2,000&#160;stockholders or if the common
    stock is listed on an exchange that constitutes a national
    securities exchange within the meaning of Section&#160;203, we
    would become subject to the foregoing restrictions.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Certificate
    of incorporation and amended and restated bylaws.</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Provisions of our certificate of incorporation and bylaws may
    delay or discourage transactions involving an actual or
    potential change in our control or change in our management,
    including transactions in which stockholders might otherwise
    receive a premium for their shares and transactions that our
    stockholders might otherwise deem to be in their best interests.
    As a result, these provisions could adversely affect the price
    of our common stock. Our certificate of incorporation permits
    our board of directors to issue up to 6,785,481&#160;shares of
    preferred stock, with any rights, preferences and privileges as
    they may designate, including the right to approve an
    acquisition or other change in our control. In addition, our
    certificate of incorporation and bylaws:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    provide that the authorized number of directors may be changed
    only by resolution of the board of directors;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    provide that all vacancies, including newly created
    directorships, may, except as otherwise required by law, be
    filled by the affirmative vote of a majority of directors then
    in office, even if such number is less than a quorum;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    require that any action to be taken by our stockholders be
    effected at a duly called annual or special meeting of
    stockholders and not by written consent;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    provide that stockholders seeking to present proposals before a
    meeting of stockholders or to nominate candidates for election
    as directors at a meeting of stockholders must provide notice in
    writing in a timely manner, and also specify requirements as to
    the form and content of a stockholder&#146;s notice;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    do not provide for cumulative voting rights, therefore allowing
    the holders of a majority of the shares of our common stock
    entitled to vote in any election of directors to elect all of
    the directors standing for election, if they should so
    choose;&#160;and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    provide that special meetings of our stockholders may be called
    only by the chairman of the board, our chief executive officer
    or by the board of directors pursuant to a resolution adopted by
    a majority of the total number of authorized directors.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The amendment of any of these provisions would require approval
    by the holders of at least
    66<FONT style="vertical-align: text-top; font-size: 70%;">2</FONT>/<FONT style="font-size: 70%;">3</FONT>%
    of our then outstanding capital stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Transfer
    Agent and Registrar</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The main transfer agent and registrar for our common stock is
    Computershare Trust Company, N.A. in Golden, Colorado and the
    co-transfer agent and co-registrar for our common stock is
    Computershare Investor Services Inc. in Toronto, Ontario,
    Canada. The agent and registrar for our warrants is
    Computershare Trust Company of Canada in Toronto, Ontario,
    Canada.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    83
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='119'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SHARES
    ELIGIBLE FOR FUTURE SALE</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Immediately prior to this offering, there was no public market
    for our securities. Future sales of substantial amounts of
    common stock in the public market, or the perception that such
    sales may occur, could adversely affect the market price of our
    common stock. Furthermore, since only a limited number of shares
    will be available for sale shortly after this offering because
    of contractual and legal restrictions on resale described below,
    sales of substantial amounts of common stock in the public
    market after the restrictions lapse could adversely affect the
    market price for our common stock as well as our ability to
    raise equity capital in the future. There may never be an active
    public market for our common stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Based on the number of shares of common stock outstanding as of
    the date of this prospectus, upon completion of this
    offering,&#160;&#149;&#160;shares of our common stock will be
    outstanding, (assuming no exercise of the agents&#146;
    overallotment option, no exercise of other outstanding options
    or warrants and assuming conversion in full of all outstanding
    Series&#160;C Preferred Stock, together with all accrued and
    unpaid dividends thereon, at the rate of $0.2917 per share and
    conversion of $75,000 in aggregate principal amount of
    convertible promissory notes, together with all accrued and
    unpaid interest thereon, at the rate of $0.057085 per share).
    All of the shares sold in this offering (including all of the
    shares issuable upon exercise of the warrants sold in this
    offering) will be freely tradable without restriction or further
    registration under the Securities Act, except for any of those
    shares held by our &#147;affiliates,&#148; as that term is
    defined in Rule&#160;144 under the Securities Act, whose sales
    would be subject to the volume and manner of sale limitations of
    Rule&#160;144 described below. In addition,
    117,436,334&#160;shares of our common stock currently
    outstanding, or approximately&#160;&#149;&#160;% of our common
    stock outstanding after this offering, may be resold at any
    time, subject to the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements and
    <FONT style="white-space: nowrap">TSX-V</FONT> escrow
    arrangements described below. Our executive officers and
    directors currently own 82,987,673&#160;shares, or
    approximately&#160;&#149;&#160;% of our common stock outstanding
    after this offering, which are eligible for resale subject to
    the volume and manner of sale limitations of Rule&#160;144 and
    subject to the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements and
    <FONT style="white-space: nowrap">TSX-V</FONT> escrow
    arrangements described below. The remaining
    19,844,920&#160;shares of our common stock currently
    outstanding, or approximately&#160;&#149;&#160;% of our
    outstanding shares after this offering, are
    &#147;restricted&#148; under Rule&#160;144 and are eligible for
    sale under the provisions of Rule&#160;144.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into a fiscal advisory agreement with the
    Canadian agents. The agreement provides that in consideration
    for the fiscal advisory services to be provided from time to
    time by the Canadian agents to us, we will issue to the Canadian
    agents at the closing of this offering that number of shares of
    our common stock equal to, depending on the gross proceeds of
    the offering, between 1.0% and 2.0% of our common stock issued
    and outstanding immediately upon the closing of the offering.
    The shares issued to the Canadian agents under the agreement
    will be subject to resale restrictions in accordance with
    applicable Canadian securities laws and will be subject to
    resale restrictions for a period of one year following the
    closing of the offering under the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements described below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Rule&#160;144</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, under Rule&#160;144 as currently in effect, a person
    (or persons whose shares are aggregated) who is not deemed to
    have been an affiliate of ours at any time during the three
    months preceding a sale, and who has beneficially owned
    restricted securities within the meaning of Rule&#160;144 for at
    least six months (including any period of consecutive ownership
    of preceding non-affiliated holders) would be entitled to sell
    those shares, subject only to the availability of current public
    information about us. A non-affiliated person who has
    beneficially owned restricted securities within the meaning of
    Rule&#160;144 for at least one year would be entitled to sell
    those shares without regard to the provisions of Rule&#160;144.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In general, under Rule&#160;144 as currently in effect, our
    affiliates or persons selling shares on behalf of our affiliates
    are entitled to sell, upon expiration of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements described above, within any three-month period
    beginning 90&#160;days after the date of this prospectus, a
    number of shares that does not exceed the greater of:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    1% of the number of shares of common stock then outstanding,
    which will equal approximately 260,846&#160;shares immediately
    after this offering;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    The average weekly trading volume of the common stock on the
    <FONT style="white-space: nowrap">TSX-V</FONT> during
    the four calendar weeks preceding the filing of a notice on
    Form&#160;144 with respect to such sale.
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    84
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Sales under Rule&#160;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.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Rule&#160;701</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Rule&#160;701 under the Securities Act, as currently in effect,
    permits the resale of shares in reliance on Rule&#160;144
    without compliance with certain restrictions of Rule&#160;144,
    including the holding period requirement. Most of our employees,
    executive officers, directors and consultants who purchased
    shares under a written compensatory plan or contract may be
    entitled to rely on the resale provisions of Rule&#160;701
    provided that they wait until 90&#160;days after the date of
    this prospectus before selling their shares. However,
    substantially all Rule&#160;701&#160;shares are subject to
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements as described below and under &#147;Underwriting&#148;
    and will become eligible for sale upon the expiration of those
    agreements (or as otherwise permitted under those agreements).
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times"><FONT style="white-space: nowrap">Lock-Up</FONT>
    Agreements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have agreed with the agents to use our commercially
    reasonable efforts to cause our directors, executive officers
    and stockholders who will hold more than 2.5% of our outstanding
    common stock (or securities exercisable, exchangeable or
    convertible for common stock) on a fully-diluted basis
    immediately after the closing of this offering, who currently
    collectively represent approximately 61.9% of our outstanding
    shares of common stock, to enter into agreements with the agents
    not to offer, sell, assign, transfer, pledge, contract to sell
    or otherwise dispose of or hedge any shares of our common stock,
    or any securities convertible into or exchangeable for shares of
    common stock, for a period of one year following the closing of
    this offering. Additionally, we have agreed with the agents to
    use our commercially reasonable efforts to cause stockholders
    who will hold more than 1.0% of our outstanding common stock (or
    securities exercisable, exchangeable or convertible for common
    stock) on a fully-diluted basis immediately after the closing of
    this offering and our key employees, who collectively represent
    approximately 11.0% of our outstanding shares of common stock,
    to enter into agreements with the agents not to offer, sell,
    assign, transfer, pledge, contract to sell or otherwise dispose
    of or hedge any shares of our common stock, or any securities
    convertible into or exchangeable for shares of common stock, for
    a period of six months following the closing of this offering.
    The shares of our common stock to be issued to the Canadian
    agents under our fiscal advisory fee agreement will also be
    subject to restrictions on resale for a period of one year after
    the closing of the offering under the terms of the lock-up
    agreement. The agents may, in their sole discretion, at any time
    without prior notice, release all or any portion of the shares
    from the restrictions in any such agreement. We have been
    advised by the agents that, in considering any request to
    release shares subject to a
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreement, they will consider, among other factors, the
    stockholder&#146;s reasons for requesting the release, the
    number of shares for which the release is being requested and
    market conditions at the time. Notwithstanding the foregoing,
    for the purposes of allowing the agents to comply with NASD
    Rule&#160;2711(f)(4), if, under certain circumstances during the
    <FONT style="white-space: nowrap">16-day</FONT>
    period beginning on the last day of the
    <FONT style="white-space: nowrap">lock-up</FONT>
    period, we release earnings results or publicly announce other
    material news or a material event relating to us is publicly
    announced, the
    <FONT style="white-space: nowrap">lock-up</FONT>
    period will be extended until 18&#160;days following the date of
    release of the earnings results or the announcement of the
    material news or material event, as applicable.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Registration
    Rights</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, the holders of
    31,764,437&#160;shares of our common stock, and warrants to
    purchase up to 1,428,571&#160;shares of our common stock will be
    entitled to include their shares of common stock in any
    subsequent registration statement that we file registering the
    sale of common stock under the Securities Act, subject to
    certain limitations and exceptions. Registration of these shares
    under the Securities Act would result in the shares becoming
    freely tradable without restriction under the Securities Act,
    except for shares purchased by affiliates, immediately upon the
    effectiveness of the registration. Any sales of securities by
    these stockholders could have a material adverse effect on the
    trading price of our common stock. See &#147;Description of
    Capital Stock&#160;&#151; Registration Rights.&#148;
</DIV>

<DIV style="margin-top: 8pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Equity
    Incentive Plans</FONT></B>
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to file with the SEC a registration statement under
    the Securities Act covering the shares of common stock reserved
    for issuance under our 2007 option plan, 2009 option plan and
    directors&#146; plan. We expect the
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    85
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    registration statements to be filed and become effective as soon
    as practicable after the completion of this offering. Shares
    registered under that registration statement will be available
    for sale in the open market following its effective date,
    subject to Rule&#160;144 volume limitations and the
    <FONT style="white-space: nowrap">lock-up</FONT>
    arrangements described above and the
    <FONT style="white-space: nowrap">TSX-V</FONT> escrow
    arrangements described below, if applicable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>The following three sections describe restrictions on resale
    arising under the rules and regulations of applicable Canadian
    securities regulators and the
    <FONT style="white-space: nowrap">TSX-V.</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Principal&#146;s
    Escrow</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In accordance with the National Policy
    <FONT style="white-space: nowrap">46-201</FONT>
    <I>Escrow for Initial Public Offerings </I>(National Policy
    <FONT style="white-space: nowrap">46-201),</FONT> our
    Principals (as defined below) are required to deposit into
    escrow our equity securities and any securities that are
    convertible into our equity securities that they own or control
    (which we refer to as the &#147;Principal&#146;s Escrow&#148;).
    &#147;Principals&#148; include all persons or companies that
    will, on the completion of this offering, fall into at least one
    of the following categories: (i)&#160;a person or company who
    acted as our promoter within two years before the date of this
    prospectus; (ii)&#160;our directors
    <FONT style="white-space: nowrap">and/or</FONT>
    senior officers; (iii)&#160;those who own
    <FONT style="white-space: nowrap">and/or</FONT>
    control more than 10% of our voting securities immediately after
    the completion of this offering if they also have appointed or
    have the right to appoint one or more of our directors or senior
    officers; (iv)&#160;those who own
    <FONT style="white-space: nowrap">and/or</FONT>
    control more than 20% of our voting securities immediately after
    the completion of this offering; (v)&#160;associates and
    affiliates of any of the above; (vi)&#160;a company, trust,
    partnership or other entity more than 50% held by one or more
    Principals; and (vii)&#160;a Principal&#146;s spouse and their
    relatives that live at the same address as the Principal.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to the Principals&#146; Escrow, the Principals will
    deposit into escrow with Computershare Investor Services Inc.
    their shares of common stock, warrants and options to purchase
    shares of our common stock (which we refer to as the
    &#147;Escrowed Securities&#148;) which will be subject to escrow.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, we expect that we will be
    classified by applicable Canadian securities regulators as an
    &#147;established issuer.&#148; Accordingly, 25% of the Escrowed
    Securities will be released from escrow upon receipt of notice
    from the
    <FONT style="white-space: nowrap">TSX-V</FONT>
    confirming the listing of our common stock on the
    <FONT style="white-space: nowrap">TSX-V.</FONT> The
    remaining 75% of the Escrowed Securities will be released from
    escrow in 25% tranches at six-month intervals over an
    <FONT style="white-space: nowrap">18-month</FONT>
    period following receipt of such notice.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times"><FONT style="white-space: nowrap">TSX-V</FONT>
    Seed Share Resale Restrictions</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Securities that were issued to people other than our Principals
    prior to the completion of this offering will be subject to hold
    periods imposed by the
    <FONT style="white-space: nowrap">TSX-V</FONT> (which
    we refer to as the
    <FONT style="white-space: nowrap">&#147;TSX-V</FONT>
    Escrow&#148;). The purchase price of such securities and the
    time of their purchase relative to the date of a receipt for
    this prospectus by the applicable Canadian securities regulators
    will determine which
    <FONT style="white-space: nowrap">TSX-V</FONT> hold
    period applies. The
    <FONT style="white-space: nowrap">TSX-V</FONT> hold
    period does not apply to persons who are subject to the
    Principal&#146;s Escrow as discussed above.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Summary
    of Escrow and Contractual Restrictions on Transfer</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date hereof, the following table sets out the number
    and percentage of our securities which will be subject to the
    Principal&#146;s Escrow upon the closing of this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="54%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="13%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Percentage of Class Outstanding</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Securities Held in<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Prior to the<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Designation of Class</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Escrow(1)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Offering</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>After the Offering</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Common Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    106,475,137
</TD>
<TD nowrap align="left" valign="bottom">
    (1)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    48.3
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,513,920
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Warrants
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=60 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="2%"></TD>
    <TD width="1%"></TD>
    <TD width="97%"></TD>
</TR>

<TR>
    <TD align="right" valign="top">
    (1) </TD>
    <TD></TD>
    <TD valign="bottom">
    Pursuant to National Policy
    <FONT style="white-space: nowrap">46-201,&#160;&#149;&#160;shares</FONT>
    of our common stock will be held in escrow under the
    Principals&#146; Escrow. Pursuant to the
    <FONT style="white-space: nowrap">TSX-V</FONT>
    Escrow,&#160;&#149;&#160;shares of our common stock will be held
    in escrow under the Seed Escrow.</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    86
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='120'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">UNDERWRITING</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We intend to enter into an agency agreement with Canaccord
    Capital Corporation and Bolder Investment Partners, Ltd. to
    serve as co-lead agents of our offering in Canada. Neither
    Canaccord nor Bolder will directly offer any of our units in the
    United States. Offers of our units in the United States will be
    made only through Canaccord Adams Inc., a US registered broker
    dealer affiliated with Canaccord Capital Corporation, and such
    other US registered dealers as may be designated by our Canadian
    agents. This offering is made on a commercially reasonable
    &#147;best efforts&#148; basis. This means that the agents have
    not committed to buy any of our units, but shall use
    commercially reasonable efforts to sell our units for us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As consideration for their services, the Canadian agents will
    receive: (i)&#160;a commission equal to 8% of the gross proceeds
    of the offering; (ii)&#160;options entitling the Canadian agents
    to purchase that number of shares our common stock and warrants
    equal to 12.5% of the aggregate number of shares of our common
    stock and warrants sold under the offering (including the shares
    and warrants issued upon exercise of the over-allotment option),
    at the offering price per share and warrant, respectively, for a
    period of 12&#160;months from the closing date; and (iii)&#160;a
    non-refundable due diligence fee of Cdn$15,000. The Canadian
    agents will also be reimbursed for their reasonable fees and
    expenses including the reasonable legal fees and disbursements
    of legal counsel to the agents. The Canadian agents may appoint
    selling agents in the United States, including Canaccord Adams
    Inc., which may be paid selling commissions not to exceed 6% of
    the gross proceeds of the offering in the United States and
    options entitling US selling agents to purchase that number of
    shares of our common stock and warrants equal to 8% of the
    aggregate number of shares of our common stock and warrants sold
    in the United States under the offering (including the shares
    and warrants issued upon exercise of the over-allotment option)
    at the initial public offering price for a period of
    12&#160;months from the closing date. The commission paid to US
    selling agents will be paid by the Canadian agents from their
    commissions.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The agents will use commercially reasonable efforts to sell up
    to&#160;&#149;&#160;units at a minimum price of
    Cdn$&#160;&#149;&#160; per unit. The offering is not subject to
    any minimum number of units sold or our receipt of any minimum
    proceeds from the sale of the units. We may elect to hold more
    than one closing until we have sold all of units offered or
    until our offering terminates. We have granted the agents an
    over-allotment option, exercisable for a period of 30&#160;days
    from the date of the closing of this offering, to sell
    additional shares of common stock and whole warrants up to the
    lesser of the agents&#146; over-allocation position determined
    as of the time of closing of the offering
    and&#160;&#149;&#160;shares of common stock
    and&#160;&#149;&#160;whole warrants (15% of the number of shares
    and warrants offered by us under this prospectus) or any
    combination thereof at a price of Cdn$&#160;&#149;&#160; per
    share and Cdn$&#160;&#149;&#160; per warrant to cover
    over-allotments, if any, and for market stabilization purposes.
    For greater clarity, these warrants will only be issued for the
    purpose of distribution of units to purchasers. The aggregate
    number of shares and warrants issuable to purchasers pursuant to
    the offering will not
    exceed&#160;&#149;&#160;and&#160;&#149;&#160;, respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The warrants will be issued pursuant to the terms of a warrant
    indenture dated as of the closing date between us and
    Computershare Trust&#160;Company of Canada, as warrant agent.
    The warrant indenture will contain provisions designed to
    protect the holders of warrants against dilution upon the
    happening of certain events. No fractional shares will be issued
    upon exercise of the warrants.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The obligations of the agents under the agency agreement may be
    terminated by the agents in their discretion on the basis of
    their assessment of the state of the financial markets and may
    also be terminated in certain stated circumstances and upon the
    occurrence of certain stated events.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The agents, or registered
    <FONT style="white-space: nowrap">sub-agents</FONT>
    who assist the agents in the distribution of the units offered
    hereunder, conditionally offer the units, subject to prior sale,
    if, as and when issued by us and accepted by the agents in
    accordance with the conditions contained in the agency agreement
    and subject to the approval of certain legal matters, on behalf
    of counsel to both us and the agents. While the agents will
    solicit expressions of interest and arrange for subscriptions
    for units prior to closing, the agents will not accept proceeds
    prior to closing. Subscriptions for the common stock and
    warrants constituting the units will be received subject to
    rejection or allotment in whole or in part and the right is
    reserved to close the subscription books at any time without
    notice.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We estimate that our total expenses of the offering, excluding
    underwriting commissions, will be approximately
    $&#160;&#160;&#160;&#160;&#160;&#160;million and are payable by
    us. We will pay all these expenses from the proceeds of the
    offering. We will also reimburse the agents for all of their
    expenses including all of the fees owed by them to their legal
    counsel.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    87
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Offering
    Price Determination</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Prior to the offering, there has been no public market for our
    securities. The initial public offering price of our units will
    be negotiated between us and the agents. In addition to
    prevailing market conditions, the factors considered in
    determining the initial public offering price are our financial
    information, our historical performance, our future prospects
    and the future prospects of our industry in general, our capital
    structure, estimates of our business potential and earnings
    prospects, the present state of our development and an
    assessment of our management and the consideration of the above
    factors in relation to market valuation of companies engaged in
    businesses and activities similar to ours.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    An active trading market for our common stock may not develop.
    It is also possible that after the offering, the shares of
    common stock will not trade in the public market at or above the
    initial public offering price. Any of the underwriting
    activities mentioned in this section may have the effect of
    preventing or retarding a decline in the market price of the
    common stock. The agents may also cause the price of the common
    stock to be higher than the price that would otherwise exist in
    the open market in the absence of these transactions. The agents
    may conduct these transactions on the
    <FONT style="white-space: nowrap">TSX-V</FONT> or in
    the
    <FONT style="white-space: nowrap">over-the-counter</FONT>
    market, or otherwise. If the agents commence any of these
    transactions, they may discontinue them at any time.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The agents do not intend to confirm sales of the shares to any
    accounts over which they have discretionary authority.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Allocation
    of Purchase Price</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In acquiring our units, the purchasers will be acquiring
    ownership of the shares of common stock and the warrants
    represented by our units. The shares of common stock and
    warrants represented by our units are separate securities and,
    accordingly, purchasers will be required to allocate the
    purchase price paid for units between the shares of common stock
    and the warrants on a reasonable basis in order to determine
    their respective costs for purposes of federal income tax. We
    intend to allocate Cdn$&#160;&#149;&#160; of the public offering
    price of each unit as consideration for the issue of each share
    of common stock and Cdn$&#160;&#149;&#160; for the issue of each
    one-half warrant. Although we believe this allocation is
    reasonable, this allocation will not be binding on the Internal
    Revenue Service or any other tax authority and neither Vuzix nor
    our counsel express any opinion as to this allocation. <B>The
    information provided herein does not constitute tax advice. You
    must consult your own tax advisors concerning the application of
    US federal income tax laws to your particular situation as well
    as any consequences of the purchase, ownership, and disposition
    of the shares of common stock and warrants arising under the
    laws of any other jurisdiction.</B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Stabilization,
    Short Positions and Penalty Bids</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Until the distribution of the shares is completed, SEC rules may
    limit agents and selling group members from bidding for and
    purchasing our common stock. However, the agents&#146;
    representatives may engage in transactions that stabilize the
    price of our common stock, such as bids or purchases to peg, fix
    or maintain that price.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If the agents create a short position in the common stock in
    connection with the offering (i.e., if they sell more shares
    than are listed on the cover of this prospectus), the
    agents&#146; representatives may reduce that short position by
    purchasing shares in the open market. The agents&#146;
    representatives may also elect to reduce any short position by
    exercising all or part of the over-allotment option described
    above. Purchases of the common stock to stabilize its price or
    to reduce a short position may cause the price of the common
    stock to be higher than it might be in the absence of such
    purchases.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The agents&#146; representatives may also impose a penalty bid
    on agents and selling group members. This means that if the
    agents&#146; representatives purchase shares of common stock in
    the open market to reduce the underwriter&#146;s short position
    or to stabilize the price of such shares of common stock, they
    may reclaim the amount of the selling concession from the agents
    and selling group members who sold those shares of common stock.
    The imposition of a penalty bid may also affect the price of the
    shares of common stock in that it discourages resales of those
    shares of common stock.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    88
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Neither we nor any of the agents make any representation or
    prediction as to the direction or magnitude of any effect that
    the transactions described above may have on the price of the
    common stock. In addition, neither we nor any of the agents make
    any representation that the agents&#146; representatives or lead
    manager will engage in these transactions or that these
    transactions, once commenced, will not be discontinued without
    notice.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times"><FONT style="white-space: nowrap">Lock-Up</FONT>
    Agreements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have agreed with the agents to use our commercially
    reasonable efforts to cause our directors, executive officers
    and stockholders who will hold more than 2.5% of our outstanding
    common stock (or securities exercisable, exchangeable or
    convertible for common stock) on a fully-diluted basis
    immediately after the closing of this offering, who collectively
    hold approximately&#160;&#149;&#160;% of our outstanding shares
    of common stock, to enter into agreements with the agents not to
    offer, sell, assign, transfer, pledge, contract to sell or
    otherwise dispose of or hedge any shares of our common stock, or
    any securities convertible into or exchangeable for shares of
    common stock, for a period of one year following the closing of
    this offering. Additionally, we have agreed with the agents to
    use our commercially reasonable efforts to cause stockholders
    who will hold more than 1.0% of our outstanding common stock (or
    securities exercisable, exchangeable or convertible for common
    stock) on a fully-diluted basis immediately after the closing of
    this offering and our key employees, who collectively hold
    approximately&#160;&#149;&#160;% of our outstanding shares of
    common stock, to enter into agreements with the agents not to
    offer, sell, assign, transfer, pledge, contract to sell or
    otherwise dispose of or hedge any shares of our common stock, or
    any securities convertible into or exchangeable for shares of
    common stock, for a period of six months following the closing
    of this offering.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The foregoing restricted periods will be extended if during the
    last 17&#160;days of the restricted period we issue an earnings
    release or material news or a material event relating to us
    occurs, or prior to the expiration of the restricted period we
    announce that we will release earnings results during the
    <FONT style="white-space: nowrap">16-day</FONT>
    period beginning on the last day of the restricted period, in
    which case the restrictions described above will continue to
    apply until the expiration of the
    <FONT style="white-space: nowrap">18-day</FONT>
    period beginning on the issuance of the earnings release or the
    occurrence of the material news or material event.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The restriction described in the immediately preceding
    paragraphs do not apply to: (a)&#160;transactions by
    stockholders not deemed to be our affiliates relating to shares
    of common stock or other securities acquired in open market
    transactions after the completion of this offering;
    (b)&#160;transfers of shares of common stock or any security
    exercisable for shares of common stock as a <I>bona fide
    </I>gift or gifts; (c)&#160;distributions of shares of common
    stock or any security exercisable for shares of common stock to
    corporations, partnerships, limited liability companies or other
    entities to the extent that such entities are wholly-owned by
    the stockholder that agrees to be bound by the restrictions
    described in the preceding paragraphs; (d)&#160;tenders of
    shares of common stock made in response to a <I>bona fide
    </I>third party take-over bid made to all holders of shares of
    common stock or similar acquisition transaction; (e)&#160;any
    transfer to an immediate family member or an entity of which the
    transferor or an immediate family member of the transferor is
    the sole beneficiary; or (f)&#160;a pledge of shares of common
    stock or any security exercisable for shares of common stock to
    a bank or other financial institution for the purpose of giving
    collateral for a debt made in good faith; provided, that in the
    case of any transfer, distribution or pledge pursuant to clause
    (b), (c), (e)&#160;or (f), each donee, distributee, transferee
    or pledgee agrees in writing to be bound by the transfer
    restrictions described in the preceding paragraphs and no filing
    by any party under the Exchange Act shall be required or shall
    be voluntarily made in connection with subsequent sales of
    shares of common stock or other securities acquired in such
    transfer or distribution.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Indemnification</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have agreed to indemnify the agents against certain
    liabilities relating to the offering, including without
    restriction liabilities under the Securities Act, and
    liabilities arising from breaches of the representations and
    warranties contained in the underwriting agreement, and to
    contribute to payments that the agents may be required to make
    for these liabilities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Fiscal
    Advisory Fee Agreement</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have entered into a fiscal advisory fee agreement with the
    Canadian agents. The agreement provides that the Canadian agents
    have and will continue to provide certain customary fiscal
    advisory services, including assisting and
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    89
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    advising us with respect to capital markets strategies and
    assisting us in its development of an investor relations
    strategy and communications with existing investors. In
    consideration for the services to be provided under the
    agreement, we will issue to the Canadian agents at the closing
    of this offering that number of shares of our common stock equal
    to, depending on the gross proceeds of the offering, between
    1.0% and 2.0% of our common stock issued and outstanding
    immediately upon the closing of the offering. The shares issued
    to the Canadian agents under the agreement will be issued
    pursuant to exemptions from the registration requirements of
    applicable United&#160;States and Canadian securities laws and
    will be subject to resale restrictions under those laws and to
    resale restrictions for a period of one year following the
    closing of the offering under the
    <FONT style="white-space: nowrap">lock-up</FONT>
    agreements described above. The agreement will terminate, and we
    will have no obligation to issue any shares to the Canadian
    agents thereunder, if the offering has not closed by
    October&#160;31, 2009.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<A name='121'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">LEGAL
    MATTERS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Boylan, Brown, Code, Vigdor&#160;&#038; Wilson, LLP, Rochester,
    New York, will pass upon the validity of the shares of common
    stock being offered by this prospectus. The agents are being
    represented by in this offering by Dorsey&#160;&#038; Whitney
    LLP, Denver, Colorado.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<A name='122'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">EXPERTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Rotenberg&#160;&#038; Co. LLP, an independent registered public
    accounting firm, has audited our consolidated financial
    statements as of December&#160;31, 2008. Davie Kaplan,
    CPA,&#160;P.C., an independent registered public accounting
    firm, has audited our financial statements as of
    December&#160;31, 2007 and 2006 as set forth in their reports
    thereon accompanying such financial statements included in this
    prospectus and in this registration statement. We have included
    these financial statements in this prospectus and in the
    registration statement in reliance on both Rotenberg&#160;&#038;
    Co. LLP and Davie Kaplan&#146;s reports, given on the authority
    of such firm as experts in accounting and auditing.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date hereof, the partners, counsel and associates of
    Boylan, Brown, Code, Vigdor&#160;&#038; Wilson, LLP or
    Dorsey&#160;&#038; Whitney LLP beneficially own directly or
    indirectly, respectively, less than 1% of our common stock or
    any common stock of any of our affiliates or associates.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<A name='123'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">WHERE YOU
    CAN FIND ADDITIONAL INFORMATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have filed with the SEC a registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-1</FONT>
    (including exhibits and schedules thereto) under the Securities
    Act with respect to the shares of common stock being offered by
    this prospectus. This prospectus does not contain all of the
    information included in the registration statement. For further
    information about us and our common stock offered by this
    prospectus, we refer you to the registration statement.
    Statements contained in this prospectus as to the contents of
    any contract or any other document referred to are not
    necessarily complete, and in each instance, we refer you to the
    copy of the contract or other document filed as an exhibit to
    the registration statement. Each of these statements is
    qualified in all respects by this reference.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    You may read our SEC filings, including the registration
    statement, over the Internet at the SEC&#146;s website at
    www.sec.gov. You may also read and copy any document we file
    with the SEC at its public reference facilities at
    100&#160;F&#160;Street, N.E., Room&#160;1580,
    Washington,&#160;D.C. 20549. In addition, you may obtain copies
    of these documents at prescribed rates by writing to the Public
    Reference Section of the SEC at 100&#160;F&#160;Street, N.E.,
    Room&#160;1580, Washington,&#160;D.C. 20549. Please call the SEC
    at
    <FONT style="white-space: nowrap">1-800-SEC-0330</FONT>
    for further information on the operation of the public reference
    facilities.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon completion of this offering, we will be subject to the
    information reporting requirements of the Securities Exchange
    Act and we will file reports, proxy statements and other
    information with the SEC. These reports, proxy statements and
    other information will be available for inspection and copying
    at the public reference facilities and website of the SEC
    referred to above. We also maintain a website at www.vuzix.com,
    at which you may access these materials free of charge as soon
    as reasonably practicable after they are electronically filed
    with, or furnished to, the SEC. The information contained on,
    connected to or that can be accessed through our website is not
    part of this prospectus. We have included our website address in
    this prospectus as an inactive textual reference only and not as
    an active hyperlink.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    90
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='124'><B><FONT style="font-family: 'Times New Roman', Times">INDEX
    TO CONSOLIDATED FINANCIAL STATEMENTS</FONT></B></A>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="97%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadleft -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=quadright -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Page</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#300'>Report of Rotenberg&#160;&#038; Co. LLP,
    Independent Registered Public Accounting Firm</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-2
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#306'>Report of Davie Kaplan, CPA, P.C., Independent
    Registered Public Accounting Firm</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-3
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#301'>Consolidated Balance Sheets&#160;&#151;
    December&#160;31, 2007 and 2008 and March&#160;31, 2008 and 2009
    (Unaudited)</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-4
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#303'>Consolidated Statements of Stockholders&#146;
    (Deficit) Equity&#160;&#151; For The Years Ended
    December&#160;31, 2006, 2007 and 2008 and the Three Months Ended
    March&#160;31, 2009 (Unaudited)</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-5
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#304'>Consolidated Statements of Cash Flows&#160;&#151;
    For the Years Ended December&#160;31, 2006, 2007 and 2008 and
    the Three Months Ended March&#160;31, 2008 and 2009
    (Unaudited)</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-6
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#302'>Consolidated Statements of Operations&#160;&#151;
    For the Years Ended December&#160;31, 2006, 2007 and 2008 and
    the Three Months Ended March&#160;31, 2008 and 2009
    (Unaudited)</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-7
</TD>
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <A HREF='#305'>Notes to Consolidated Financial Statements</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD>&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    F-8
</TD>
<TD>&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-1
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='300'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 15pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To the Board of Directors and
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Stockholders of Vuzix Corporation
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have audited the accompanying consolidated balance sheet of
    Vuzix Corporation and its subsidiary as of December&#160;31,
    2008, and the related consolidated statement of operations,
    changes in stockholders&#146; equity and cash flows for the
    period then ended. Vuzix Corporation&#146;s management is
    responsible for these financial statements. Our responsibility
    is to express an opinion on these financial statements based on
    our audit. The financial statements of Vuzix Corporation as of
    December&#160;31, 2007, were audited by other auditors whose
    report dated June&#160;17, 2008 expressed an unqualified opinion
    on those statements.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    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 included
    consideration of internal control over financial reporting as a
    basis for designing audit procedures that are appropriate in the
    circumstances, but not for the purpose of expressing an opinion
    on the effectiveness of the company&#146;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.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In our opinion, the consolidated financial statements referred
    to above present fairly, in all material respects, the financial
    position of Vuzix Corporation as of December&#160;31, 2008, and
    the results of its operations and its cash flows for the period
    ending December&#160;31, 2008 in conformity with accounting
    principles generally accepted in the United States of America.
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    /s/&#160;Rotenberg &#038; Co. LLP
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Rochester, New York
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    June&#160;17, 2009
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-2
</DIV><!-- END PAGE WIDTH -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<A name='306'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><U><FONT style="font-family: 'Times New Roman', Times">INDEPENDENT
    AUDITORS&#146; REPORT</FONT></U></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To the Board of Directors and Stockholders
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    VUZIX Corporation
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have audited the balance sheets of VUZIX Corporation (F/K/A
    Icuiti Corporation) as of December&#160;31, 2007 (Restated) and
    2006, and the related statements of operations, changes in
    stockholders&#146; equity and cash flows for the years then
    ended. These financial statements are the responsibility of the
    Company&#146;s management. Our responsibility is to express an
    opinion on these financial statements based on our audits.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We conducted our audits in accordance with U.S.&#160;generally
    accepted auditing standards. Those standards require that we
    plan and perform the audit to obtain reasonable assurance about
    whether the financial statements are free of material
    misstatement. An audit includes examining, on a test basis,
    evidence supporting the amounts and disclosures in the financial
    statements. An audit also includes assessing the accounting
    principles used and significant estimates made by management, as
    well as evaluating the overall financial statement presentation.
    We believe that our audits provide a reasonable basis for our
    opinion.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In our opinion, the financial statements referred to above
    present fairly, in all material respects, the financial position
    of VUZIX Corporation (F/K/A Icuiti Corporation) as of
    December&#160;31, 2007 (Restated) and 2006, and the results of
    its operations, changes in stockholders&#146; equity and its
    cash flows for the years then ended in conformity with
    U.S.&#160;generally accepted accounting principles.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our audits were made for the purpose of forming an opinion on
    the basic financial statements taken as a whole. The
    supplemental information is presented for the purpose of
    additional analysis and is not a required part of the basic
    financial statements. Such information has been subjected to the
    auditing procedures applied in the audit of the basic financial
    statements and, in our opinion, is fairly stated in all material
    respects in relation to the basic financial statements taken as
    a whole.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As discussed in Note&#160;20 to the financial statements, the
    2007 financial statements have been restated to correct a
    misstatement.
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;Davie
    Kaplan, CPA, P.C.</DIV>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    June&#160;17, 2008
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (Except for Note&#160;20, as to which the date is April&#160;14,
    2009)
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-3
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION<BR>
    F/K/A ICUITI CORPORATION<BR>
    <BR>
    <A name='301'>CONSOLIDATED BALANCE SHEETS</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 13pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="47%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>March&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>March&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>December&#160;31,<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(As restated)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD colspan="21" align="center" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>ASSETS</B>
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Current Assets</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Cash and Cash Equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    259,151
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    69,534
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    818,719
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    364,856
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    569,171
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Accounts Receivable, Net (Note&#160;3)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    962,519
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    872,126
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,413,611
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,908,224
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,977,103
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Inventories (Note&#160;4)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,426,298
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,618,470
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,307,321
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,984,465
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,157,733
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Prepaid Income Taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    130,130
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    136,130
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    130,130
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    130,130
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Prepaid Expenses and Other Assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    67,449
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,680
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    41,390
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    108,525
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Total Current Assets</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,845,547
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,803,940
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,711,171
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,496,200
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,706,507
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Tooling and Equipment, Net (Note&#160;5)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    721,860
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    869,534
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    825,924
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    857,170
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    781,979
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Patents and Trademarks, Net (Note&#160;6)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    710,176
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    642,751
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    684,802
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    613,884
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    524,777
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Total Assets</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,277,583
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,316,225
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,221,897
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,967,254
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,013,263
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 9pt">
<TD colspan="21">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="21" align="center" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B>
</DIV>
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Current Liabilities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Accounts Payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,348,752
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,249,518
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,763,321
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,029,630
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,743,349
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Lines of Credit (Note&#160;7)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    199,767
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    186,270
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    202,290
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    78,400
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    92,237
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Current Portion of Long-term Debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    500,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    500,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    200,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Current Portion of Capital Leases
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    139,800
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    139,800
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    139,800
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    171,778
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    155,625
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Customer Deposits (Note&#160;8)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    328,841
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    742,154
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    729,677
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    46,637
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    125,584
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Accrued Expenses (Note&#160;9)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    220,246
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    103,879
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    185,960
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    171,872
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    319,946
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Income Taxes Payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    888
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,039
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    36,412
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    31,225
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Total Current Liabilities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,738,294
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,455,660
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,557,460
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,529,542
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,636,741
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 9pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Long-Term Liabilities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Accrued Compensation (Note&#160;10)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    445,096
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    445,096
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    445,096
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    445,096
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    445,096
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Long Term Portion of Long-Term Debt (Note&#160;11)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    379,208
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    784,208
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    379,208
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    784,208
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    991,188
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Long Term Portion of Capital Leases (Note&#160;12)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    145,410
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    232,115
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    180,328
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    247,052
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    216,519
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Accrued Interest
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    443,120
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    341,560
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    425,448
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    314,921
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    211,574
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Cumulative Dividends Payable on Preferred Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    349,574
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    248,474
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    324,299
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    223,199
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    122,099
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Total Long-Term Liabilities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,762,408
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,051,453
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,754,379
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,014,476
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,980,476
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Total Liabilities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,500,702
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,507,113
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,311,839
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,544,018
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,617,217
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Stockholders&#146; Equity</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Series&#160;C Preferred Stock&#160;&#151; $.001&#160;Par Value,
    500,000&#160;Shares&#160;Authorized; (Refer to Note&#160;14 for
    Series&#160;A, Series&#160;B and Unauthorised Preferred Stock)
    168,500&#160;Shares&#160;Issued and Outstanding in Each Period
    (Note&#160;14)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    169
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    169
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    169
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    169
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    169
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Common Stock&#160;&#151; $.001&#160;Par Value,
    400,000,000&#160;Shares&#160;Authorized; 220,268,927,
    200,424,027&#160;Shares&#160;Issued and Outstanding
    March&#160;31, Respectively 218,268,927, 197,973,139 and
    173,268,048&#160;Shares&#160;Issued and&#160;Outstanding
    December&#160;31, Respectively
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    220,269
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    200,424
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    218,269
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    197,972
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    173,268
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Additional Paid-in Capital
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,039,100
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,299,419
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,700,413
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,238,589
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,115,622
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Accumulated (Deficit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (15,161,140
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (11,369,383
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (14,687,276
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (9,691,977
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,531,363
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Subscriptions Receivable (Note&#160;19)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (321,517
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (321,517
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (321,517
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (321,517
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (361,650
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Total Stockholders&#146; Equity</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,223,119
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,190,888
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,089,942
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    423,236
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (603,954
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Total Liabilities and Stockholders&#146; Equity</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,277,583
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,316,225
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,221,897
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,967,254
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,013,263
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The accompanying notes are an integral part of these
    consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-4
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION<BR>
    F/K/A ICUITI CORPORATION<BR>
    <BR>
    <A name='303'>CONSOLIDATED STATEMENTS OF CHANGES IN
    STOCKHOLDERS&#146; EQUITY</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 7pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="37%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=08 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=08 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=08 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=08 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=09 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=09 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=09 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=09 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 6pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Common Stock</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Additional<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Retained<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Preferred Stock</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Subscriptions<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Paid-In Capital</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Deficit</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Receivable</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    <B>Balance&#160;&#151; December&#160;31, 2005</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    173,245,191
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    173,245
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,593,693
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (5,718,223
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    123,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    123
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (266,240
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (217,402
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Issuance of Preferred Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    407,604
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    45,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    46
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    407,650
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Dividends
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (93,186
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (93,186
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Stock Compensation Expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18,418
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18,418
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Exercise of Stock Options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    22,857
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    497
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    520
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Extension of Subscriptions Receivable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    95,410
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (95,410
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    2006 Net Loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (719,954
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (719,954
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    <B>Balance&#160;&#151; December&#160;31, 2006</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    173,268,048
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    173,268
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,115,622
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6,531,363
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    168,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    169
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (361,650
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (603,954
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Warrants Issued for Services
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    78,275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    78,275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Exercise of Stock Options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    402,483
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    402
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,328
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,730
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Exercise of Stock Warrants
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    177,136
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    177
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,373
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,550
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Issuance of Common Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,125,472
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    23,125
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,767,686
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,790,811
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Conversion of Debt into Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,000,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    199,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    200,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Stock Compensation Expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    111,438
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    111,438
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Dividends
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (101,100
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (101,100
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Extension of Subscriptions Receivable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (40,133
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40,133
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    2007 Net Loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,059,514
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,059,514
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    <B>Balance&#160;&#151; December&#160;31, 2007
    (As&#160;Restated)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    197,973,139
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    197,972
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,238,589
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (9,691,977
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    168,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    169
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (321,517
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    423,236
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Exercise of Options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,450,888
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,451
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,245
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    16,696
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Issuance of Common Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,847,517
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,848
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,122,798
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,138,646
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Exercise of Stock Warrants
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,552,936
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,553
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,033
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,586
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Stock Issued for Services
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    444,447
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    444
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    66,223
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    66,667
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Dividends
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (101,100
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (101,100
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Warrants Issued for Services
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    66,227
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    66,227
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Stock Compensation Expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    180,298
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    180,298
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    2008 Net Loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4,894,199
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4,894,199
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    <B>Balance&#160;&#151; December&#160;31, 2008</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    218,268,927
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    218,268
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12,700,413
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (14,687,276
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    168,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    169
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (321,517
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (2,089,943
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Exercise of Options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Issuance of Common Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,000,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    298,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    300,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Exercise of Stock Warrants
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Stock Issued for Services
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Repurchase of Fractional Shares
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Dividends
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (25,275
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (25,275
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Warrants Issued for Services
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Stock Compensation Expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40,689
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40,689
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    Net Loss for the 3&#160;months ended March&#160;31, 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (448,589
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (448,589
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -7pt; margin-left: 7pt">
    <B>Balance&#160;&#151; March&#160;31, 2009 (Unaudited)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    220,268,927
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    220,268
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    13,039,100
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (15,161,140
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    168,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    169
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (321,517
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (2,223,120
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The accompanying notes are an integral part of these
    consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-5
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION<BR>
    F/K/A ICUITI CORPORATION<BR>
    <BR>
    <A name='304'>CONSOLIDATED STATEMENTS OF CASH FLOWS</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="56%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>For Three Months Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom">
    <B>For Years Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>March&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(As restated)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Cash Flows from Operating Activities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Net Loss
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (448,589
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,652,195
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (4,894,199
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (3,059,514
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (719,954
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Non-Cash Adjustments</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Depreciation and Amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    138,834
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    123,696
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    510,133
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    374,078
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    276,989
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Stock-Based Compensation Expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40,689
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    46,584
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    180,298
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    111,438
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    18,418
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Stock Issued for Services
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    66,667
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Warrants Issued for Services
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    66,227
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    78,275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>(Increase) Decrease in Operating Assets</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Accounts Receivable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    451,092
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,032,098
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,494,613
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (931,121
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,226,116
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Inventories
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (118,977
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (634,005
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (322,856
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (826,732
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (362,118
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Prepaid Income Taxes
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (130,130
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Prepaid Expenses and Other Assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (26,060
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,155
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    67,135
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (106,025
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,919
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Increase (Decrease) in Operating Liabilities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Accounts Payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (414,504
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (780,111
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    733,691
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,580,255
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,496,609
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Accrued Expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34,284
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (67,929
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,088
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (175,574
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    289,124
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Customer Deposits
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (400,836
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    695,517
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    683,040
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (78,947
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (117,722
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Income Taxes Payable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (35,524
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,814
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,187
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    31,225
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,192
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Accrued Commissions
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (266,475
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    266,475
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Accrued Compensation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    135,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Accrued Interest
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    17,672
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    26,639
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    110,527
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    103,347
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    55,237
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Net Cash Flows (Used in) Provided From Operating
    Activities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (761,919
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (208,047
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,285,449
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,295,900
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    120,053
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Cash Flows from Investing Activities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Purchases of Tooling and Equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (19,369
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (122,380
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (424,166
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (180,310
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (370,188
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Investments in Patents and Trademarks
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (40,839
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (42,547
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (125,638
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (136,433
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (109,048
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Net Cash Used in Investing Activities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (60,208
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (164,927
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (549,804
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (316,743
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (479,236
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Cash Flows from Financing Activities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Net Change in Lines of Credit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,523
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    107,870
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    123,890
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (13,837
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (115,138
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Issuance of Common Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    300,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,138,646
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,792,362
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Issuance of Preferred Stock
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    407,650
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Repayment of Capital Leases
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (34,918
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (46,915
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (98,702
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (168,947
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (121,135
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Prepayment of Long-Term Debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (206,980
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (22,328
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Exercise of Stock Options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    16,697
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    16,696
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,730
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    520
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Exercise of Stock Warrants
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,586
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Proceeds from Long-Term Debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    95,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    725,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Net Cash Flows Provided by Financing Activities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    262,559
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    77,652
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,289,116
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,408,328
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    874,569
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Net Increase (Decrease) in Cash and Cash Equivalents
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (559,568
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (295,322
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    453,863
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (204,315
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    515,386
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Cash and Cash Equivalents&#160;&#151; Beginning of Year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    818,719
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    364,856
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    364,856
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    569,171
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    53,785
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Cash and Cash Equivalents&#160;&#151; End of Year</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    259,151
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    69,534
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    818,719
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    364,856
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    569,171
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Supplemental Disclosures</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Interest Paid
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    45,747
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    29,490
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    149,214
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    138,345
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    179,019
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Income Taxes Paid
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    36,412
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    425
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    425
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,725
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,950
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    <B>Non-Cash Investing Transactions</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Equipment Acquired Under Capital Lease
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,528
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    89,833
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    221,633
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    317,932
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Equipment Acquired Through Assumption of Long-Term Debt
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    62,010
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Dividends Declared but Not Paid
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25,275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25,275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    101,100
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    101,100
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    93,186
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -8pt; margin-left: 8pt">
    Debt Converted to Equity
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    200,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The accompanying notes are an integral part of these
    consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-6
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION<BR>
    F/K/A ICUITI CORPORATION<BR>
    <BR>
    <A name='302'>CONSOLIDATED STATEMENTS OF OPERATIONS</FONT></B>
</DIV>
</A>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="45%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom">
    <B>For Three Months<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom">
    <B>For Years Ended<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Ended March&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>December&#160;31,</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>(Unaudited)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" nowrap align="center" valign="bottom">
    <B>(As restated)</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Sales of Products
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,595,504
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,663,875
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    11,015,784
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,701,004
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    6,910,866
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Sales of Engineering Services
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    448,490
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    57,039
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,548,703
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,445,375
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,627,442
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Total Sales</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,043,994
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,720,914
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    12,564,487
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    10,146,379
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,538,308
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Cost of Sales&#160;&#151; Products
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,617,174
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,440,348
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7,844,519
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,407,340
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,269,908
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Cost of Sales&#160;&#151; Engineering Services
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    239,509
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    47,001
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,018,989
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,376,133
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,497,642
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Total Cost of Sales</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,856,683
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,487,349
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,863,508
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,783,473
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,767,550
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Gross Profit</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,187,311
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    233,565
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,700,979
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,362,906
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,770,758
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 7pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Operating Expenses:
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Research and Development
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    502,011
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    736,716
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,366,518
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,365,412
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,279,239
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Selling and Marketing
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    449,266
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    449,562
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,128,625
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,920,164
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,191,800
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    General and Administrative
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    478,253
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    533,799
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,299,685
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,718,627
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,560,278
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 18pt">
    Depreciation and Amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    138,834
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    123,696
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    510,133
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    374,078
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    276,989
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Total Operating Expenses</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,568,364
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,843,773
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8,304,961
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,378,281
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,308,306
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Loss from Operations</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (381,053
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,610,208
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4,603,982
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,015,375
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (537,548
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Other Income (Expense)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Interest and Other (Expense) Income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    188
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,549
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    313
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Foreign Exchange Gain (Loss)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,272
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    366
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (24,216
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Legal Settlement
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    96,632
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Interest Expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (65,376
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (41,600
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (260,977
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (241,692
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (179,019
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Total Other Income (Expense)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (66,648
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (41,234
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (285,005
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (142,511
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (178,706
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Loss Before Provision for Income Taxes</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (447,701
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,651,442
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4,888,987
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (3,157,886
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (716,254
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Provision (Benefit) for Income Taxes (Note&#160;13)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    888
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    753
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,212
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (98,372
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <B>Net Loss</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (448,589
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (1,652,195
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (4,894,199
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (3,059,514
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (719,954
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Basic and Diluted Loss per Share
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0022
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0084
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0229
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0160
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (0.0047
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Weighted-average Shares Outstanding&#160;&#151; Basic and Diluted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    220,268,927
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    200,424,027
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    218,268,927
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    197,973,139
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    173,268,048
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The accompanying notes are an integral part of these
    consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-7
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <A name='305'><B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL STATEMENTS<BR>
    </FONT></B>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    </A><B><FONT style="font-family: 'Times New Roman', Times">(Amounts
    and disclosures at and for the three months ended March&#160;31,
    2009 and 2008 are unaudited)</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;1&#160;&#151;
    Basis of Presentation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The unaudited Consolidated Financial Statements of Vuzix
    Corporation and Subsidiary (the &#147;Company&#148;) for the
    three months ending March&#160;31, 2009 and 2008 have been
    prepared in accordance with generally accepted accounting
    principles in the United States of America for interim financial
    information. Accordingly, the Consolidated Financial Statements
    do not include all of the information and footnotes required by
    generally accepted accounting principles for complete financial
    statements. In the opinion of management, all adjustments
    considered necessary for a fair presentation have been included.
    The results for the interim periods are not necessarily
    indicative of the results to be expected for the year. The
    accompanying Consolidated Financial Statements should be read in
    conjunction with the audited Consolidated Financial Statements
    of the Company as of December&#160;31, 2008, as included with
    these consolidated financial statements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;2&#160;&#151;
    Nature of Business and Summary of Significant Accounting
    Policies</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">The
    Company</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Vuzix Corporation (the Company) was formed in 1997 under the
    laws of the State of Delaware and maintains its corporate
    offices in Rochester, New York. The Company changed its name to
    Vuzix Corporation in September 2007, being previously known as
    Icuiti Corporation. The Company is engaged in the design,
    manufacture, marketing and sale of devices that are worn like
    eyeglasses and which feature built-in video screens that enable
    the user to view video and digital content, such as movies,
    computer data, the Internet or video games. Our products (known
    commercially as &#147;Video Eyewear&#148;) are used to view high
    resolution video and digital information from portable devices,
    such as cell phones, portable media players, gaming systems and
    laptop computers and from personal computers. Our products
    provide the user with a virtual viewing experience that emulates
    viewing a large screen television or desktop computer monitor
    practically anywhere, anytime.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Segment
    Data, Geographic Information and Significant
    Customers</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company is not organized by market and is managed and
    operated as one business. A single management team that reports
    to the chief operating decision maker comprehensively manages
    the entire business. The Company does not operate any material
    separate lines of business or separate business entities.
    Accordingly, the Company does not accumulate discrete
    information, other than product revenue and material costs, with
    respect to separate product lines and does not have separately
    reportable segments as defined by Statement of Financial
    Accounting Standards (SFAS) No.&#160;131, &#147;Disclosures
    about Segments of an Enterprise and Related Information.&#148;
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Shipments to customers outside of the United States approximated
    20%, 12% and 5% of sales in 2008, 2007 and 2006, respectively.
    No single international country represented more than 10% of
    revenues. The Company does not maintain significant amounts of
    long-lived assets outside of the United States other than
    tooling held by its third party manufacturers, primarily in
    China.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has at times had a concentration of sales to the
    U.S.&#160;government and they amounted to approximately 12% and
    54% of sales in 2008 and 2007, respectively. Accounts receivable
    from the U.S.&#160;government accounted for 31% and 19% of
    accounts receivable at 2008 and 2007, respectively. Another
    customer, who is also a minority stockholder, represented 20%
    and 17% of sales in 2008 and 2007, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Principles
    of Consolidation</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The consolidated financial statements include the accounts of
    the Company and its wholly owned subsidiary, Vuzix Europe. All
    significant inter-company transactions have been eliminated.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-8
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Foreign
    Currency Translation</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The U.S.&#160;dollar is the functional currency of the
    Company&#146;s foreign subsidiary. Monetary assets and
    liabilities are re-measured at year-end exchange rates.
    Non-monetary assets and liabilities are re-measured at
    historical rates. Revenues, expenses, gains and losses are
    re-measured using the rates on which those elements were
    recognized during the period.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Use of
    Estimates</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The preparation of the consolidated financial statements in
    conformity with accounting principles generally accepted in the
    United States requires management to make estimates and
    assumptions that affect the reported amounts of assets and
    liabilities and disclosure of contingent assets and liabilities
    at year end and the reported amounts of revenue and expenses
    during the reporting period. Actual results could differ from
    those estimates.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Concentration
    of Credit Risk</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company performs ongoing credit evaluations of its
    customers&#146; financial condition and maintains an allowance
    for uncollectible accounts receivable based upon the expected
    collectability of all accounts receivable. As of
    December&#160;31, 2008, one customer, represented 31% of net
    accounts receivable and was subsequently received during 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For cash management purposes, the Company concentrates its cash
    holdings in two accounts at the JP Morgan Chase Bank. The
    balance in these accounts may exceed the federally insured limit
    of $250,000 per customer by the Federal Deposit Insurance
    Corporation in case of bank failure. At December&#160;31, 2008
    and 2007, the Company had $462,808 and $250,851 in excess of the
    insurance limit at this bank.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Cash
    and Cash Equivalents</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company&#146;s cash received is applied against its two
    revolving lines of credit on a periodic basis based projected
    monthly cash flows, reducing interest expense. Cash and cash
    equivalents can include highly liquid investments with original
    maturities of three months or less.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Fair
    Value of Financial Instruments</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company&#146;s financial instruments primarily consists of
    cash and cash equivalents, accounts receivable, inventories,
    prepaid income taxes, prepaid expenses and other assets,
    accounts payable, lines of credit, current portion of long-term
    debt and capital leases, customer deposits, accrued expenses,
    and income taxes payable.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the consolidated balance sheet date, the estimated fair
    values of the financial instruments were not materially
    different from their carrying values as presented due to the
    short maturities of these instruments and that the interest
    rates on the borrowing approximate those that would have been
    available for loans for similar remaining maturity and risk
    profiles at respective year ends.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Allowance
    for Doubtful Accounts</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company establishes an allowance for uncollectable trade
    accounts receivable based on the age of outstanding invoices and
    management&#146;s evaluation of collectability of outstanding
    balances. These provisions are established when the aging of
    outstanding amounts exceeds allowable terms and are re-evaluated
    at each quarter end for adequacy. In determining the adequacy of
    the provision, the Company considers known uncollectable or at
    risk receivables.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-9
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Provision
    for Future Warranty Costs</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Warranty costs are accrued, to the extent that they are not
    recoverable from third party manufacturers, for the estimated
    cost to repair or replace products for the balance of the
    warranty periods. The Company&#146;s products are covered by
    standard warranty plans that extend normally 12&#160;months to
    24&#160;months from the date of product shipment. The Company
    provides for the costs of expected future warranty claims at the
    time of product shipment or over-builds to cover replacements.
    The adequacy of the provision is assessed at each quarter end
    and is based on historical experience of warranty claims and
    costs. As of December&#160;31, 2008, the Company&#146;s
    provision for future warranty claims was $106,865 compared to
    $73,064 as of December&#160;31, 2007, with the increase
    attributable primarily to increased revenue from product
    shipments.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Inventories</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Inventories are valued at the lower of cost, or market using the
    <FONT style="white-space: nowrap">first-in,</FONT>
    first-out method. The Company does not include any direct
    overheads costs in its inventory valuation costing, as such
    amounts have been immaterial in its current and prior fiscal
    years. The Company records provisions for excess, obsolete or
    slow moving inventory based on changes in customer demand,
    technology developments or other economic factors. The
    Company&#146;s products have product life cycles that range on
    average from two to three years currently. At both the product
    introduction and product discontinuation stage, there is a
    higher degree of risk of inventory obsolescence. The provision
    for obsolete and excess inventory is evaluated for adequacy at
    each quarter end. The estimate of the provision for obsolete and
    excess inventory is partially based on expected future product
    sales, which are difficult to forecast for certain products.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Revenue
    Recognition</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company recognizes revenue from product sales in accordance
    with the SEC Staff Accounting Bulletin&#160;No.&#160;104,
    &#147;Revenue Recognition.<I>&#148; </I>Product sales represent
    the majority of the Company&#146;s revenue. The Company
    recognizes revenue from these product sales when persuasive
    evidence of an arrangement exists, delivery has occurred or
    services have been provided, the sale price is fixed or
    determinable, and collectability is reasonably assured.
    Additionally, the Company sells its products on terms which
    transfer title and risk of loss at a specified location,
    typically shipping point. Accordingly, revenue recognition from
    product sales occurs when all factors are met, including
    transfer of title and risk of loss, which typically occurs upon
    shipment by the Company. If these conditions are not met, the
    Company will defer revenue recognition until such time as these
    conditions have been satisfied. The Company collects and remits
    sales taxes in certain jurisdictions and reports revenue net of
    any associated sales taxes. The Company also sells certain
    products through distributors who are granted limited rights of
    return for stock balancing against purchases made within a prior
    90&#160;day period, including price adjustments downwards that
    the Company implements on any existing inventory. The provision
    for product returns and price adjustments is assessed for
    adequacy both at the time of sale and at each quarter end and is
    based on recent historical experience and known customer claims.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Revenue from any engineering consulting and other services is
    recognized at the time the services are rendered. The Company
    accounts for its longer-term development contracts, which to
    date have all been firm fixed-priced contracts, on the
    <FONT style="white-space: nowrap">percentage-of-completion</FONT>
    method, whereby income is recognized as work on contracts
    progresses, but estimated losses on contracts in progress are
    charged to operations immediately. The
    <FONT style="white-space: nowrap">percentage-of-completion</FONT>
    is determined using the
    <FONT style="white-space: nowrap">cost-to-cost</FONT>
    method. Amounts are generally billed on a monthly basis. To date
    all such contracts have been less than one calendar year in
    duration.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-10
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Tooling
    and Equipment</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Tooling and equipment are stated at cost. Depreciation of
    tooling and equipment is provided for using the straight-line
    method over the following estimated useful lives:
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="92%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Computers and Software
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3&#160;years
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Manufacturing Equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5&#160;years
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Tooling
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3&#160;years
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Furniture and Equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5&#160;years
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Repairs and maintenance costs are expensed as incurred. Asset
    betterments are capitalized.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Patents
    and Trademarks</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company capitalizes the costs of obtaining its patents and
    registration of Trademarks. Such costs are accumulated and
    capitalized during the filing periods, which can take several
    years to complete. Successful applications that result in the
    granting of a patent or trademark are then amortized over
    15&#160;years on a straight-line basis. Unsuccessful
    applications are written off and expensed in the fiscal period
    where application is abandoned or discontinued.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Long-Lived
    Assets</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company regularly assesses all of its long-lived assets for
    impairment when events or circumstances indicate their carrying
    amounts may not be recoverable, in accordance with
    SFAS&#160;No.&#160;144, &#147;Accounting for the Impairment or
    Disposal of Long-Lived Assets.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Research
    and Development</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Research and development costs, are expensed as incurred and
    include employee related costs, office expenses, third party
    design and engineering services, and new product prototyping
    costs.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Shipping
    and Handling Costs</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Amounts charged to customers and costs incurred by the Company
    related to shipping and handling are included in net sales and
    cost of goods sold, respectively, in accordance with EITF Issue
    <FONT style="white-space: nowrap">No.&#160;00-10,</FONT>
    &#147;Accounting for Shipping and Handling Fees and Costs.&#148;
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Advertising</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Advertising costs are expensed as incurred and recorded in
    &#147;Selling and marketing&#148; in the Consolidated Statements
    of Operations. Advertising expense amounted to $1,009,992,
    $893,973 and $291,800 for 2008, 2007 and 2006, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Income
    Taxes</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company accounts for income taxes in accordance with
    SFAS&#160;No.&#160;109. Accordingly, the Company provides
    deferred income tax assets and liabilities based on the
    estimated future tax effects of differences between the
    financial and tax bases of assets and liabilities based on
    currently enacted tax laws. A valuation allowance is established
    for deferred tax assets in amounts for which realization is not
    considered more likely than not to occur.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company reports any interest and penalties accrued relating
    to uncertain income tax positions as a component of the income
    tax provision.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-11
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Earnings
    Per Share</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Basic earnings per share is computed by dividing net income by
    the weighted average number of common shares outstanding for the
    period. Diluted earnings per share calculations reflect the
    assumed exercise and conversion of all dilutive employee stock
    options and the conversion of any outstanding convertible
    preferred shares or notes payable that
    <FONT style="white-space: nowrap">are-in-the-money,</FONT>
    applying the treasury stock method. However, the assumed
    exercise of stock options and warrants and the conversion of
    preferred shares or notes payable are anti-dilutive, therefore
    basic and diluted earnings per share are the same for all
    periods. All share and per-share amounts in the accompanying
    consolidated financial statements and notes to the consolidated
    financial statements have been adjusted to apply the effect of
    the reverse stock split
    <FONT style="white-space: nowrap">(one-for-seven)</FONT>
    in 2007 and the forward stock split
    <FONT style="white-space: nowrap">(eight-for-one)</FONT>
    in 2008.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Stock-Based
    Employee Compensation</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Effective January&#160;1, 2006, the provisions of
    SFAS&#160;No.&#160;123 (revised 2004), &#147;Share-Based
    Payment,&#148; and related interpretations were adopted.
    SFAS&#160;No.&#160;123(R) requires that compensation expense be
    recognized in the consolidated financial statements for
    share-based awards based on the grant-date fair value of those
    awards. The Company elected to not adopt
    SFAS&#160;No.&#160;123(R) for any stock options granted prior to
    December&#160;31, 2005 which had unrecognized compensation
    expense at January&#160;1, 2006, and has instead applied it to
    only new share-based awards granted subsequent to
    December&#160;31, 2005, based on the grant-date fair value
    estimated in accordance with the provisions of
    SFAS&#160;No.&#160;123(R). Stock-based compensation expense
    includes an estimate for pre-vesting forfeitures and is
    recognized over the requisite service periods of the awards on a
    straight-line or graded vesting basis, which is generally
    commensurate with the vesting term. As a result of the adoption
    of SFAS&#160;No.&#160;123(R), stock-based compensation expense
    associated with stock option grants of $180,298, $111,438 and
    $18,418 was recorded in 2008, 2007 and 2006, respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company issues new shares upon stock option exercises.
    Please refer to Note&#160;J, <I>Stock-based Compensation
    Expense</I>, for further information.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Fair
    Value Measurements</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In September 2006, the Financial Accounting Standards Board
    (&#147;FASB&#148;) issued SFAS&#160;No.&#160;157, &#147;Fair
    Value Measurements&#148; (&#147;SFAS&#160;No.&#160;157&#148;).
    SFAS&#160;No.&#160;157 defines fair value, establishes a
    framework for measuring fair value in accordance with accounting
    principles generally accepted in the United States, and expands
    disclosures about fair value measurements. The Company has
    adopted the provisions of SFAS&#160;No.&#160;157 as of
    January&#160;1, 2008 for financial instruments. This standard
    defines fair value, establishes a framework for measuring fair
    value in generally accepted accounting principles, and expands
    disclosures about fair value measurements. Further, the Company
    has taken into consideration the guidance promulgated in FASB
    Staff Position
    <FONT style="white-space: nowrap">No.&#160;FAS&#160;157-3,</FONT>
    &#147;Determining the Fair Value of a Financial Asset When the
    Market for that Asset is Not Active,&#148; in estimating the
    fair value of its financial instruments. The adoption of
    SFAS&#160;157 was not material to the Company&#146;s
    consolidated financial statements or results of operations.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    SFAS&#160;No.&#160;157 establishes a fair value hierarchy which
    prioritizes the inputs to valuation techniques used to measure
    fair value. Level&#160;1 inputs are quoted prices in active
    markets for identical assets or liabilities. Level&#160;2 inputs
    are inputs other than quoted prices included in Level&#160;1
    that are directly or indirectly observable for the asset or
    liability. Such inputs include quoted prices in active markets
    for similar assets and liabilities, quoted prices for identical
    or similar assets or liabilities in markets that are not active,
    inputs other than quoted prices that are observable for the
    asset or liability, or inputs derived principally from or
    corroborated by observable market data by correlation or other
    means. Level&#160;3 inputs are unobservable inputs for the asset
    or liability. Such inputs are used to measure fair value when
    observable inputs are not available.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-12
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Recent
    Accounting Pronouncements</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In December 2007, the FASB issued SFAS&#160;No.&#160;141(R),
    &#147;Business Combinations,&#148; a revision to
    SFAS&#160;No.&#160;141, &#147;Business Combinations.&#148;
    SFAS&#160;No.&#160;141(R) provides revised guidance for
    recognition and measurement of identifiable assets and goodwill
    acquired, liabilities assumed and any non-controlling interest
    in the acquiree at fair value. The Statement also establishes
    disclosure requirements to enable the evaluation of the nature
    and financial effects of a business combination.
    SFAS&#160;No.&#160;141(R) is required to be applied
    prospectively to business combinations for which the acquisition
    date is on or after January&#160;1, 2009. The impact of the
    adoption of SFAS&#160;141(R) on our consolidated financial
    position and results of operations will be dependent on the size
    and nature of business combinations, if any, completed after the
    adoption of this Statement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In December 2007, the FASB issued SFAS&#160;No.&#160;160,
    &#147;Non-controlling Interests in Consolidated Financial
    Statements&#160;&#151; an amendment of ARB No.&#160;51.&#148;
    This Statement establishes accounting and reporting standards
    for ownership interests in subsidiaries held by parties other
    than the parent. Specifically, SFAS&#160;No.&#160;160 requires
    the presentation of non-controlling interests as equity in the
    Consolidated Balance Sheets, and separate identification and
    presentation in the Consolidated Statements of Income of net
    income attributable to the entity and the non-controlling
    interest. It also establishes accounting and reporting standards
    regarding deconsolidation and changes in a parent&#146;s
    ownership interest. SFAS&#160;No. 160 is effective as of
    January&#160;1, 2009. The provisions of SFAS&#160;No.&#160;160
    are generally required to be applied prospectively, except for
    the presentation and disclosure requirements, which must be
    applied retrospectively. We do not expect the adoption of SFAS
    No.&#160;160 to have a material effect on our consolidated
    financial statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In February 2008, the FASB issued FSP
    <FONT style="white-space: nowrap">FAS&#160;157-2,</FONT>
    which delays the effective date of SFAS No.&#160;157 for all
    non-financial assets and non-financial liabilities, except those
    that are recognized or disclosed at fair value in the
    consolidated financial statements on a recurring basis (at least
    annually). This FSP partially deferred the effective date of
    SFAS&#160;No.&#160;157 to fiscal years beginning after
    November&#160;15, 2008, and interim periods within those fiscal
    years for items within the scope of this FSP. This FSP will be
    adopted by the Company in the first quarter of fiscal year 2009,
    and is not expected to have a material impact on its
    consolidated financial statements.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In March 2008, the FASB issued SFAS&#160;No.&#160;161,
    &#147;Disclosures about Derivative Instruments and Hedging
    Activities, an amendment of FASB Statement No.&#160;133.&#148;
    This statement enhances the disclosure requirements related to
    derivative instruments and hedging activity to improve the
    transparency of financial reporting, and is effective for fiscal
    years and interim periods beginning after November&#160;15,
    2008. We do not expect the impact of adoption of SFAS
    No.&#160;161 will have a material effect on our consolidated
    financial statements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;3&#160;&#151;
    Accounts Receivable, Net</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Accounts receivable consisted of the following:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="75%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accounts Receivable
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,417,870
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,908,224
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less: Allowance for Doubtful Accounts
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (4,259
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,413,611
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,908,224
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-13
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;4&#160;&#151;
    Inventories, Net</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Inventories consisted of the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="75%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Purchased Parts and Components
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,091,734
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,656,093
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Work in Process
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    130,351
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    197,413
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Finished Goods
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    539,883
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    211,994
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less: Reserve for Obsolescence
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (454,647
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (81,035
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,307,321
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,984,465
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;5&#160;&#151;
    Tooling and Equipment, Net</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Tooling and equipment consisted of the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="73%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Tooling and Manufacturing Equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,567,537
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,247,402
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Computers and Software
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    522,274
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    463,847
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Furniture and Equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    360,695
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    315,091
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,450,506
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,026,340
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less: Accumulated Depreciation and Amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,624,582
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,169,170
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    825,924
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    857,170
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Total depreciation expense for tooling and equipment for 2008,
    2007 and 2006 was $455,412, $326,752, and $237,592, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;6&#160;&#151;
    Patents and Trademarks, Net</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="74%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="6%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Patents and Trademarks
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    899,952
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    774,314
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less: Amortization
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (215,150
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (160,430
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    684,802
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    613,884
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Total amortization expense for patents and trademarks for 2008,
    2007 and 2006 was $54,720, $47,326, and $39,397, respectively.
    The estimated aggregate amortization expense for each of the
    next five fiscal years is $57,175.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;7&#160;&#151;
    Lines of Credit</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has available a $100,000 line of credit secured by
    the personal guarantee of an officer of the Company with
    interest payable at the bank&#146;s prime rate plus 4.24%. The
    outstanding balance on the line of credit amounted to $96,040
    and $78,400 at December&#160;31, 2008 and 2007, respectively.
    The prime rate at 2008 was 3.25%.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company also has available a $112,500 line of credit with
    interest payable at the bank&#146;s prime rate plus 1%. The line
    is unsecured and personally guaranteed by an officer of the
    Company. The outstanding balance on the line of credit amounted
    to $106,250 and $0 at December&#160;31, 2008 and 2007,
    respectively.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-14
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;8&#160;&#151;
    Customer Deposits</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Customer deposits represents money the Company received in
    advance of providing a product or engineering services to a
    customer. Such deposits are short term in nature as the Company
    delivers the product or engineering services to the customer
    before the end of its next annual fiscal period.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;9&#160;&#151;
    Accrued Expenses</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Accrued expenses consisted of the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="79%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued Wages and Related Costs
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    25,478
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    65,194
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued Professional Services
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    40,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    27,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued Warranty Obligations
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    106,865
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    73,064
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other Accrued Expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,617
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,114
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    185,960
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    171,872
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has warranty obligations in connection with the sale
    of certain of its products. The warranty period for its products
    is generally one year except in European countries where it is
    two years. The costs incurred to provide for these warranty
    obligations are estimated and recorded as an accrued liability
    at the time of sale. The Company estimates its future warranty
    costs based on product-based historical performance rates and
    related costs to repair. The changes in the Company&#146;s
    accrued warranty obligations for 2008, 2007 and 2006 were as
    follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="90%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued Warranty Obligations at January&#160;1, 2006
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,361
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Actual Warranty Experience
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (28,317
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Warranty Provisions
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    55,431
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued Warranty Obligations at December&#160;31, 2006
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    42,475
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Actual Warranty Experience
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (48,710
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Warranty Provisions
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    79,299
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued Warranty Obligations at December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    73,064
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Actual Warranty Experience
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (71,244
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Warranty Provisions
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    105,045
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accrued Warranty Obligations at December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    106,865
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;10&#160;&#151;
    Accrued Compensation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Accrued compensation represents amounts owed to officers of the
    Company for services rendered prior to 2007 that remain
    outstanding. The principal is not subject to a fixed repayment
    schedule, and interest on the outstanding balance is payable at
    8% per annum. Interest expense related to accrued compensation
    amounts to $35,608, $35,608 and $24,808 for the years ended
    December&#160;31, 2008, 2007 and 2006, respectively. Total
    accrued interest on the accrued compensation was $154,753 and
    $119,145 as of December&#160;31, 2008 and 2007, respectively and
    these amounts are included in Accrued Interest, under the
    Long-Term Liabilities portion of the consolidated balance sheet.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-15
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;11&#160;&#151;
    Long-Term Debt</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Long-term debt consisted of the following at December 31:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="79%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Note payable to an officer of the Company. The principal is not
    subject to a fixed repayment schedule, bears interest at 8% per
    annum and is secured by all of the assets of the Company
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    209,208
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    209,208
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    During October 2008, entered into an agreement with an officer
    of the Company, whereby the officer agrees to make loans from
    time to time to the Company through December&#160;31, 2010,
    accruing interest on the outstanding balance at 12%, secured by
    all of the assets of the Company
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    95,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Bridge loans in the original amount of $15,000 to stockholders
    of the Company with no fixed date of repayment, accruing
    interest at 7.5% and are unsecured. The Company has granted
    holders the same conversion terms as the $60,000 in notes below
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    15,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Convertible promissory notes in the original amount of $60,000.
    These notes bear interest at 8% and are unsecured. There is no
    set date of repayment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    60,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    60,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Convertible Notes payable bearing interest at 10% and is secured
    by all the assets of the Company
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    500,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    500,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    879,208
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    784,208
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less: Amount Due Within One Year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    500,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Amount Due After One Year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    379,208
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    784,208
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The aggregate maturities for all long-term borrowings as of
    December&#160;31, 2008 are as follows:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-left: 4%; margin-right: 4%">
<TABLE border="0" width="92%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=01 type=lead -->
    <TD width="15%" align="right">&nbsp;</TD>	<!-- colindex=01 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=01 type=hang1 -->
    <TD width="8%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="8%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="8%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="8%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="8%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
    <TD width="8%">&nbsp;</TD>	<!-- colindex=07 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=07 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=07 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=07 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2010</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2011</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2012</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2013</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Thereafter</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    500,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    95,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    284,208
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    879,208
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Include above are convertible promissory notes and bridge loans
    that the Company has issued. The notes and loans may be
    converted into the Company&#146;s common stock at $0.0571 per
    share. Unpaid, accrued interest on these notes and loans amounts
    to $48,717 and $40,085 at December&#160;31, 2008 and 2007,
    respectively. The total potential conversions of these notes and
    loans along with accrued interest amounted to 2,144,522 and
    2,013,078&#160;shares at December&#160;31, 2008 and 2007,
    respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Included above is a $500,000 convertible note payable due to a
    related party. The note may be converted into the Company&#146;s
    common stock at $0.2667 per share. Unpaid accrued interest on
    this note amounted to $114,247 and $64,110 at December&#160;31,
    2008 and 2007, respectively. The total potential note conversion
    along with accrued interest amounted to 2,303,138 and
    2,115,148&#160;shares at December&#160;31, 2008 and 2007,
    respectively. This note was due January&#160;31, 2009 and was
    still outstanding as of March&#160;31, 2009. The interest rate
    has changed to 18% onwards and the note principal is now being
    rolled-over on a month to month basis.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-16
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;12&#160;&#151;
    Capital Lease Obligations</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company maintains equipment held under capital lease
    obligations due in monthly installments ranging from $95 to
    $2,811 including interest at rates ranging from 0.00% to 20.08%.
    The related equipment is collateral to the leases. Final
    payments are due through September, 2011.
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="77%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total Principal Payments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    320,128
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    418,830
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less: Amount Due Within One Year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (139,800
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (171,778
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Amount Due After One Year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    180,328
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    247,052
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Annual requirements for retirement of the capital lease
    obligations are as follows:
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="90%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Amount</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    244,610
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2010
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    109,498
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2011
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30,301
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2012
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    2013
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total Minimum Lease Payments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    384,409
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less: Amount Representing Interest
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (64,281
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Present Value of Minimum Lease Payments
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    320,128
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is a summary of assets held under capital leases:
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="77%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Tooling and Manufacturing Equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    390,940
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    313,657
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Computers and Software
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    315,591
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    303,042
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Furniture and Equipment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    112,648
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    112,648
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    819,179
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    729,347
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Less: Accumulated Depreciation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (490,866
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (286,127
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    328,313
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    443,220
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Depreciation expense related to the assets under capital lease
    amounted to $204,739, $175,114, and $98,043 for years ended
    December&#160;31, 2008, 2007, and 2006, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;13&#160;&#151;
    Income Taxes</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company files U.S.&#160;federal, and U.S.&#160;state tax
    returns. At December&#160;31, 2008, the Company had unrecognized
    tax benefits totaling $2,962,000, of which would have a
    favorable impact on our tax provision (benefit), if recognized.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pre-tax earnings consisted of the following for the years ended
    December&#160;31, 2008, 2007 and 2006:
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-left: 4%; margin-right: 4%">
<TABLE border="0" width="92%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="61%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total Pre-Tax (Loss) Earnings
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (4,888,987
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (3,157,886
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (716,254
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-17
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The provision (benefit) for income taxes was as follows:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="72%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Current Income Tax Provision (Benefit)</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Federal
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    State
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,212
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (98,372
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net Change in Liability for Unrecognized Tax Benefits
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,212
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (98,372
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Deferred Provision (Benefit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total Provision (Benefit)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    5,212
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (98,372
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A reconciliation of the statutory U.S.&#160;federal income tax
    rate to the effective rates is as follows:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="72%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="7%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="7%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="2%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Federal Income Tax at Statutory Rate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    34.0
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    State Tax Provision, Net of Federal Benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (0.3
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (0.2
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Meals and Entertainment
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (0.3
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (0.3
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (0.8
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stock Compensation Expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1.3
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1.2
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (0.9
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Research and Development Credits
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2.1
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2.5
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (6.2
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (0.2
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Effective Tax Rate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    30.3
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    29.7
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    25.7
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Change in Valuations Allowance
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (30.3
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (29.7
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (25.7
</TD>
<TD nowrap align="left" valign="bottom">
    )%
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net Effective Tax Rate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
    %
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-18
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Deferred tax assets (liabilities) consist of the following:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="73%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Assets</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Current</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Inventory and Inventory Related Items
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    68,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Bad Debt and Note Receivable Reserves
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Non-Current</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net Operating Loss Carryforwards
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,825,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,235,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stock Compensation Expense
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Tax Credit Carryforwards
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    946,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    656,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Depreciation
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Other
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    122,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    102,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total Gross Deferred Tax Assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,962,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,005,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Valuation Allowance&#160;&#151; 100%
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,962,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,005,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total Net Deferred Tax Assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Liabilities</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Current</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    New York State Refund
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    (19,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total Gross Deferred Tax Liabilities
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (19,000
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Valuation Allowance&#160;&#151; 100%
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    19,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total Net Deferred Tax Liability
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net Deferred Tax
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="73%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="9%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net Current Deferred Tax Assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net Long-Term Deferred Tax Assets
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In 2008 and 2007, the Company generated federal and state net
    operating losses for income tax purposes. These federal and
    state net operating loss carryforwards, which total
    approximately $12,200,000 at December&#160;31, 2008 and begin to
    expire in 2018, if not utilized. Of the Company&#146;s tax
    credit carryforwards, $946,000 expire between 2017 and 2018, if
    not utilized.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Deferred tax assets, including carryforwards and other
    attributes, are reviewed for expected realization and a
    valuation allowance is established when appropriate to reduce
    the assets to their estimated net realizable value. Expected
    realization of deferred tax assets is dependent upon sufficient
    taxable income in the appropriate jurisdiction and period that
    is also of the appropriate character. The Company has evaluated
    the availability of such taxable income, the nature of its
    deferred tax assets and the relevant tax laws in determining the
    net realizable value of its deferred tax assets.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, the calculation of our tax liabilities involves
    dealing with uncertainties in the application of complex tax
    regulations. As a result of the implementation of FASB
    Interpretation No.&#160;48, &#147;Accounting for Uncertainty in
    Income Taxes&#148; (FIN&#160;48), we recognize liabilities for
    uncertain tax positions based on the two-step process prescribed
    within the interpretation. The first step is to evaluate the tax
    position for recognition by determining if the weight of
    available evidence indicates that it is more likely than not
    that the position will be sustained on audit, including
    resolution of related appeals or litigation processes, if any.
    The second step requires us
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-19
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    to estimate and measure the tax benefit as the largest amount
    that is more than 50% likely of being realized upon ultimate
    settlement. It is inherently difficult and subjective to
    estimate such amounts, as this requires us to determine the
    probability of various possible outcomes. We re-evaluate these
    uncertain tax positions on a quarterly basis. This evaluation is
    based on factors including, but not limited to, changes in facts
    or circumstances, changes in tax law, effectively settled issues
    under audit and new audit activity. Such a change in recognition
    or measurement would result in the recognition of a tax benefit
    or an additional charge to the tax provision in the period.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes the activity in the valuation
    allowance account for 2008 and 2007:
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="88%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance, January&#160;1, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,682,700
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 9pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Additions Relating to Uncertain Future Realization of</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net Operating Losses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    245,500
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    State Research and Development Tax Credits
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    76,800
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance, December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,005,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 9pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Additions Relating to Uncertain Future Realization of</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net Operating Losses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    855,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    State Research and Development Tax Credits
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    102,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Balance, December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,962,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;14&#160;&#151;
    Preferred Stock</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Series&#160;A
    Preferred Stock par value $0.001 (Authorized 725,000;
    0&#160;shares issued and outstanding)</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Series&#160;A preferred stockholders do not have the right to
    vote on any matter submitted to the stockholders of the Company
    for vote, consent, or approval. The Company may at any time
    redeem all or any portion of Series&#160;A preferred stock
    outstanding at a price per share equal to the liquidation value.
    The holders of Series&#160;A preferred stock may elect to
    require the Company to redeem on or after November&#160;20, 2007
    at the liquidation value of all of the then outstanding shares
    of Series&#160;A preferred Stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Series&#160;B
    Preferred Stock par value $0.001 (Authorized 1,020,681;
    0&#160;shares issued and outstanding)</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Holders of Series&#160;B preferred stock shall have voting
    rights for all matters voted on by stockholders of the Company.
    Each Series&#160;B preferred stockholder shall have that number
    of votes equal to the number of whole common shares into which
    the stockholder&#146;s Series&#160;B preferred stock could be
    converted on that date. Each share of Series&#160;B preferred
    stock shall be convertible, at the option of the holder, into
    fully paid and non-assessable shares of common stock at the
    Conversion Ratio, as defined in the Articles of Incorporation.
    The initial conversion price of Series&#160;B preferred stock
    was $0.10.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Series&#160;C
    Preferred Stock par value $0.001 (Authorized 500,000;
    168,500&#160;shares issued and outstanding)</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Holders of Series&#160;C preferred stock shall have voting
    rights for all matters voted on by stockholders of the Company.
    Each Series&#160;C preferred stockholder shall have that number
    of votes equal to the number of whole common shares into which
    the stockholder&#146;s Series&#160;C preferred stock could be
    converted on that date. Each share of 6% Cumulative
    Series&#160;C preferred stock shall be convertible, at the
    option of the holder, into 34.29&#160;shares of common stock.
    The Series&#160;C preferred stock is redeemable at the option of
    the Company at any time after June&#160;30, 2007 for $10 per
    share plus accrued, unpaid dividends.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-20
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Preferred
    stock</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Shares of undesignated preferred stock may be issued in one or
    more series. The balance of undesignated preferred stock is
    4,500,000 as at December&#160;31, 2008. The Board of Directors
    is authorized to establish and designate the different series
    and to fix and determine the voting powers and other special
    rights and qualifications.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><I><FONT style="font-family: 'Times New Roman', Times">Preferred
    dividends</FONT></I></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Cumulative preferred dividends on the Series&#160;C series
    totaled $324,299 as of December&#160;31, 2008 and $223,199 as of
    December&#160;31, 2007. These cumulative dividends in arrears
    represented an average $1.92 per share as of December&#160;31,
    2008 and an average of $1.32 per share as of December&#160;31,
    2007. As of March&#160;31, 2009 total accrued dividends were
    $349,574 or an average of $2.07 per share.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;15&#160;&#151;
    Stock Split</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Effective July&#160;16, 2008, the Company effected a stock split
    of its common stock whereby each one share of Common Stock, par
    value $0.001 per share, of the Company&#146;s outstanding stock
    were reclassified and changed into eight shares of Common Stock,
    par value $0.001 per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Effective June&#160;28, 2007 the Company effected a reverse
    stock split of its common stock whereby each seven shares of
    Common Stock, par value $0.001 per share, of the Company&#146;s
    outstanding stock were reclassified and changed into one share
    of Common Stock, par value $0.001 per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Both the stock split and reverse share consolidation affected
    the shares outstanding and pricing for convertible debt, stock
    subscriptions, incentive stock options, stock warrants and
    stockholders&#146; equity disclosures. All share and per-share
    amounts in the accompanying consolidated financial statements
    and notes to the consolidated financial statements have been
    adjusted to apply the effect of the reverse stock split
    <FONT style="white-space: nowrap">(one-for-seven)</FONT>
    in 2007 and the forward stock split
    <FONT style="white-space: nowrap">(eight-for-one)</FONT>
    in 2008.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;16&#160;&#151;
    Stock Warrants</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2007, the Company issued warrants to purchase
    2,521,656&#160;shares, respectively, of common stock to the
    parties who helped secure financing. The exercise price was
    $0.20 per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In exchange for services performed by vendors who worked at a
    reduced rate, warrants were issued during to purchase 380,699
    and 317,032&#160;shares in 2008 and 2007, respectively, of
    common stock. The exercise prices range from $0.00875 to $0.20
    per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2008, 1,552,936 warrants were exercised at a price of
    $.00875 per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table shows the various changes in warrants for
    the years December&#160;31, 2008 and 2007.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="76%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Warrants Outstanding, Beginning of Year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,171,008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,509,456
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Exercised During the Year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (1,552,936
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (177,136
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Issued During the Year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    380,699
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,838,688
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Forfeited During the Year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Warrants Outstanding, End of Year
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,998,771
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,171,008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The outstanding warrants as of December&#160;31, 2008 expire
    from August&#160;10, 2010 to December&#160;31, 2013. The
    weighted average remaining contractual term on the warrants is
    2.7&#160;years. The weighted average exercise price is $0.1401
    per share.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-21
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2006, pursuant to a convertible note payable, a warrant
    was issued that would only be exercisable if the note holder
    converted their note along with any unpaid accrued interest. The
    exercise price if this warrant came into effect would be $0.35
    per share and the warrant would have to be exercised by
    September&#160;30, 2009. Excluding accrued interest, the
    conversion of the principal of the note and exercise of the
    resulting warrant would result in the issuance of up to
    1,071,225&#160;shares. This warrant is not included in the
    totals above.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;17&#160;&#151;
    Stock Option Plans</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has an Incentive Stock Option Plan (the
    &#147;Plan&#148;) that allows for the granting of both Qualified
    and Non-Qualified Stock Options as defined under the Internal
    Revenue Code regulations. The total authorized number of shares
    under the plan is 45,714,286. For Non-Qualified Stock Options,
    the Company may grant options that provide for the issuance of
    Common Shares of $0.001 at prices below fair market value at the
    date of grant. For Qualified Options grants, the option issuance
    price may not be less than fair market value at the date of
    grant. The Plan gives the Board of Directors of the Company the
    ability to determine vesting periods for all options granted
    under the Plan, and allows option terms to be up to ten years
    from the original grant date. Employees&#146; incentive stock
    options must vest at a minimum rate of 20% per year over a five
    year period, commencing on the date of grant. Most vest ratably
    over four years commencing on the date of the option grant. In
    the case of directors, such options are granted annually and
    they expire ten years after the date of their grant and vest
    ratably, on a monthly basis, over the next 12&#160;months.
    Advisors or consultants can have vesting range from
    100&#160;percent of the option grants vesting immediately to
    ratably, on a monthly basis, over the next a period of up to
    48&#160;months.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes stock option activity for the
    three years ended December&#160;31, 2008:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="54%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="17%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Exercise Price<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Exercise Price</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Range</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Outstanding at January&#160;1, 2006
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,783,648
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.02916
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0061 &#150; $&#160;0.2334
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Granted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,601,800
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.2318
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.2275 &#150; $&#160;0.2334
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Exercised
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (22,857
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.02275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $0.02275
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Expired or Forfeited
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $&#160;&#160;&#160;&#160;&#160;&#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Outstanding at December&#160;31, 2006
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,362,591
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.05266
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0061 &#150; $&#160;0.2334
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Granted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,772,584
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.2189
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.2000 &#150; $&#160;0.2334
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Exercised
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (402,483
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.01137
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0087 &#150; $0.02889
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Expired or Forfeited
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (185,742
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.02889
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $0.02889
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Outstanding at December&#160;31, 2007
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    14,546,950
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.07254
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0061 &#150; $&#160;0.2334
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Granted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,917,288
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.1846
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.15 &#150; $&#160;&#160;&#160;0.20
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Exercised
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (2,450,888
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.00694
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0.6123 &#150; $&#160;008750
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Expired or Forfeited
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    (934,336
</TD>
<TD nowrap align="left" valign="bottom">
    )
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.1949
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.20 &#150; $&#160;0.2334
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Outstanding at December&#160;31, 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,079,014
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0914
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0061 &#150; $&#160;0.2334
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of December&#160;31, 2008, there were 9,582,619 options that
    were fully vested and exercisable at weighted average exercise
    price of $0.0594 per share. The weighted average remaining
    contractual term on the vested options is 5.7&#160;years.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The unvested balance of 3,496,395 options as of
    December&#160;31, 2008, vest ratably over less than the next
    46&#160;months.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-22
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following tables summarizes stock option information at
    December&#160;31, 2008:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="54%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="12" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Total Options Outstanding</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <BR>
    <B>Weighted average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>remaining life<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Range of exercise price</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(yrs)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>exercise price</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    $0.0062 to $0.0087
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,995,192
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3.58
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0076
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    $0.0227 to $0.0289
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,105,291
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6.07
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0257
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    $0.1500 to $0.2000
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,644,152
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9.66
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.1889
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    $0.2100 to $0.2334
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,334,379
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8.10
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.2323
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,079,014
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6.59
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0914
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="55%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="12" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Exercisable Options Outstanding</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <BR>
    <B>Weighted average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>remaining life<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Range of exercise price</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(yrs)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>exercise price</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    $0.0062 to $0.0087
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,995,192
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3.58
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0076
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    $0.0227 to $0.0289
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,653,140
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5.98
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0255
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    $0.1500 to $0.2000
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    551,296
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9.39
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.1935
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    $0.2100 to $0.2334
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,382,991
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7.90
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.2322
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9,582,619
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5.70
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0594
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="55%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="12" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Unvested Options Outstanding</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <BR>
    <B>Weighted average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>remaining life<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Weighted average<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Range of exercise price</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Shares</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>(yrs)</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>exercise price</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    $0.0062 to $0.0087
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    $0.0227 to $0.0289
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    452,151
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    7.00
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.1350
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    $0.1500 to $0.2000
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,092,856
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9.73
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.1876
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    $0.2100 to $0.2334
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    951,388
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    8.41
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.2324
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    3,496,395
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    9.02
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.1930
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The weighted average fair value of options granted during 2008
    was $0.182842 with an aggregate value of $192,632. The weighted
    average fair value of options granted during 2007 was $0.215918
    with an aggregate total value of $224,020. The weighted average
    fair value of options granted during 2006 was $0.231794 with an
    aggregate total value of $246,214. There were no dividends in
    any of the periods.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The number of options for our securities remaining for future
    issuance (excluding options reflected above&#160;&#151;
    13,079,014 as of December&#160;31, 2008)&#160;is 29,759,011.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Cash received from option exercises in 2008, 2007, and 2006,
    amounted to $16,696, $5,730, and $520, respectively. All of the
    shares issued out of common stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    No grants, exercises, or forfeitures occurred in the three
    period ending March&#160;31, 2009. The only change was that more
    options vested.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    With respect to any non-qualified stock options and incentive
    stock options that are exercised and held for less than one
    year, the Company recognizes a tax benefit upon exercise in an
    amount equal to the tax effect of the difference between the
    option price and the fair market value of the common stock on
    the exercise date.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-23
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;18&#160;&#151;
    Stock-based Compensation Expense</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The table below summarizes the impact of outstanding stock
    options on the results of operations for the years ended
    December&#160;31, 2008, 2007 and 2006 under the provisions of
    SFAS No.&#160;123(R):
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="69%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Stock-Based Compensation Expense:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Stock Options
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    180,298
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    111,438
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    18,418
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Income Tax Benefit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Net Decrease in Net Income
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    180,298
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    111,438
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    18,418
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>Decrease in Earnings Per Share:</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Basic and Diluted
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0008
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0006
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.0001
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Black-Scholes-Merton option pricing model was used to
    estimate the fair value of share-based awards under
    SFAS&#160;No.&#160;123(R) as well as for pro forma disclosures
    under SFAS No.&#160;123. The Black-Scholes-Merton option pricing
    model incorporates various and highly subjective assumptions,
    including expected term and expected volatility. For valuation
    purposes, stock option awards were categorized into two groups,
    stock option grants to employees and stock option grants to
    members of the Board of Directors.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The expected term of options granted was estimated to be the
    average of the vesting term, historical exercise and forfeiture
    rates, and the contractual life of the option. The expected
    volatility at the grant date is estimated using historical stock
    prices based upon the expected term of the options granted. The
    risk-free interest rate assumption is determined using the rates
    for U.S.&#160;Treasury zero-coupon bonds with maturities similar
    to those of the expected term of the award being valued. Cash
    dividends have never been paid and are not anticipated to be
    paid in the foreseeable future. Therefore, the assumed expected
    dividend yield is zero.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table shows the detailed assumptions used to
    compute the fair value of stock options granted during 2008,
    2007 and 2006:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="65%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Expected Term (Years)
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6.25&#160;years
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6.25&#160;years
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6.25&#160;years
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Volatility
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    60.9%
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    63.7%
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    63.7%
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Risk Free Interest Rate
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4.39%
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4.39%
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4.49%
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    SFAS&#160;No.&#160;123(R) requires pre-vesting option
    forfeitures at the time of grant to be estimated and
    periodically revised in subsequent periods if actual forfeitures
    differ from those estimates. Stock-based compensation expense is
    recorded only for those awards expected to vest using an
    estimated forfeiture rate based on historical pre-vesting
    forfeiture data.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Unrecognized stock-based compensation expense was approximately
    $360,612 as of December&#160;31, 2008, relating to a total of
    3,496,396 unvested stock options under the Company&#146;s stock
    option plans. This stock-based compensation expense is expected
    to be recognized over a weighted average period of approximately
    3.8&#160;years.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Stock-based compensation expense for the three months ending
    March&#160;31, 2009 and 2008 was $40,689 and $46,584,
    respectively.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-24
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;19&#160;&#151;
    Stock Subscriptions Receivable</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During the year ended December&#160;31, 2002, the Company&#146;s
    Board of Directors authorized to make loans to certain senior
    employees to allow them to participate in a rights offering and
    purchase 32,537,135&#160;shares of common stock at a price of
    $0.0085 per share. While the loans were initially due September,
    2007, the due date was extended to December 2012. The loans bear
    interest at 6% and are shown as stock subscriptions receivable
    in the accompanying consolidated financial statements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;20&#160;&#151;
    Commitments</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company leases office space under an operating lease
    expiring in December, 2008 requiring monthly payments of $4,200
    plus insurance, taxes and common charges.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company leases office space under an operating lease
    expiring in May, 2009 requiring monthly payments of $3,819 plus
    insurance, taxes and common charges.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On June&#160;1, 2007 the Company acquired an operating lease for
    additional office space. The lease expires on June&#160;30, 2010
    and requires monthly payments of $3,973 plus insurance, taxes
    and common charges.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Rent expense for the years ended December&#160;31, 2008, 2007,
    and 2006 totaled $178,657, $161,410, and $95,539, respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Future minimum payments required under operating lease
    obligations are as follows:
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-left: 15%; margin-right: 15%">
<TABLE border="0" width="70%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=01 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=01 type=body -->
    <TD width="8%" align="left">&nbsp;</TD>	<!-- colindex=01 type=hang1 -->
    <TD width="21%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="7%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="7%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="21%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="12%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="12%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Total Minimum<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2010</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Lease Payments</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    66,765
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    23,835
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    90,600
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For the lease agreements described above, the Company is
    required to pay the pro rata share of the real property taxes
    and assessments, expenses and other charges associated with
    these facilities.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;21&#160;&#151;
    Employee Benefit Plans</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has a Section&#160;401(k) Savings Plan which covers
    employees who meet certain age and length of service
    requirements. To date the plan is comprised of 100% employee
    deferrals.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;22&#160;&#151;
    Litigation</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company is not subject to any legal proceedings or claims at
    the current time. The Company indemnifies its directors and
    officers who are, or were, serving at the Company&#146;s request
    in such capacities. The fair value of the indemnifications that
    the Company issued during 2008 was not material to the
    Company&#146;s financial position, results of operations or cash
    flows.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;23&#160;&#151;
    Product Revenue</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table represents the Company&#146;s total sales
    for 2008, 2007 and 2006 classified by product category:
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="58%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="10%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="8%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>December 31,</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Consumer Video Eyewear
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    4,451,121
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,282,755
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,022,623
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Defense Products
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    6,471,824
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,418,249
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    4,888,243
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Engineering Services
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,548,703
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    5,445,375
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,627,442
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Low Vision Products
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    92,839
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD style="border-top: 1px solid #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    12,564,487
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    10,146,379
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    9,538,308
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-25
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">VUZIX
    CORPORATION AND SUBSIDIARY<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTES&#160;TO
    CONSOLIDATED FINANCIAL
    STATEMENTS&#160;&#151;&#160;(Continued)</FONT></B>
</DIV>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;24&#160;&#151;
    Concentrations</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For 2008, 2007, and 2006, one customer accounted for
    approximately 20%, 17% and 42% of sales, respectively and sales
    to the U.S.&#160;government accounted for approximately 12% 54%,
    and 27%, respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Accounts receivable from the U.S.&#160;government accounted for
    31% and 19% of accounts receivable at December&#160;31, 2008 and
    2007, respectively and the other one customer mentioned above
    represented 6% and 39% of accounts receivable at
    December&#160;31, 2008 and 2007, respectively.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;25&#160;&#151;
    Related Party Transactions</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2008, $2,472,824 and $827,307 of revenues and purchases,
    respectively were derived from a minority stockholder (less than
    5%) of the Company who also represented $90,606 of the accounts
    receivable balance and $&#151; nil of the accounts payable
    balance at December&#160;31, 2008.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2007, $1,737,285 and $2,009,500 of revenues and
    purchases, respectively were derived from a minority stockholder
    (less than 5%) of the Company who also represented $1,145,472 of
    the accounts receivable balance and $1,493,956 of the accounts
    payable balance at December&#160;31, 2007.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    During 2006, $4,006,324 and $620,727 of revenues and purchases,
    respectively were derived from a minority stockholder (less than
    5%) of the Company who also represented $359,068 of the accounts
    receivable balance and $164,510 of the accounts payable balance
    at December&#160;31, 2006.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Included in long-term debt is a note payable to an officer of
    the Company. Interest expense related to the note payable amount
    to $16,737 for the years ended December&#160;31, 2008 and 2007.
    Total accrued interest on the note payable was $100,449 as of
    December&#160;31, 2008. See Note&#160;11 for details.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Included in long-term debt are bridge loans payable and
    convertible notes payable to related parties, minority
    stockholders owning less than 1% of the Company. Interest
    expense related to these loans payable amounted to $48,717,
    $40,085, and $32,056 for the years ended December&#160;31, 2008,
    2007 and 2006, respectively.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Company has accrued compensation owed to officers of the
    Company. Interest expense related to accrued compensation
    amounts to $35,608, $35,608 and $24,808 for the years ended
    December&#160;31, 2008, 2007 and 2006, respectively. Total
    accrued interest on the accrued compensation was $154,753 as of
    December&#160;31, 2008. See Note&#160;10 for details.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Note&#160;26&#160;&#151;
    Prior-Period Restatements</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The accompanying consolidated financials for 2007 have been
    restated to correct errors recognized after their initial
    release. These changes include the correction of the warranty
    reserve of $73,064; a reduction of depreciation expense of
    $15,346; and the accrual of an income tax benefit from research
    and development tax credits of $130,130. The effect of these
    restatements is an overall decrease in the net loss in the
    amount of $72,412 for 2007. There was also a reclassification of
    expenses of $499,237 between the cost of sales and operating
    expense classifications for consistency across the periods. This
    had no effect on the reported net loss.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    F-26
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt"><IMG src="o55928o5592804.jpg" alt="(GRAPHIC-IBC)"></DIV>




<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 14pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Up
    to&#160;&#149;&#160;Units</FONT></B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="o55928o5592800.gif" alt="(VUZIX LOGO)"><FONT style="font-size: 14pt">
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 14%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=68 -->

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-size: 12pt">PROSPECTUS
    </FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 14%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=456 length=68 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Until&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2009, all dealers that effect transactions in these securities,
    whether or not participating in this offering, may be required
    to deliver a prospectus. This requirement is in addition to the
    dealers&#146; obligation to deliver a prospectus when acting as
    agents and with respect to their unsold allotments or
    subscriptions.
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
    2009
</DIV>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Alternate page for Canadian Prospectus</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">
&nbsp;
</DIV><DIV style="margin-top: 0pt; font-size: 1pt">&nbsp;</DIV>
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 94%; margin-left: 3%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><I><FONT style="font-size: 8pt; color: #C41E3A">A copy of
    this preliminary prospectus has been filed with the securities
    regulatory authorities in each of the provinces of Canada other
    than Qu&#233;bec but has not yet become final for the purpose of
    the sale of securities. Information contained in this
    preliminary prospectus may not be complete and may have to be
    amended. The securities may not be sold until a receipt for the
    prospectus is obtained from the securities regulatory
    authorities.</FONT></I></B>
</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">This prospectus constitutes a
    public offering of these securities only in those jurisdictions
    where they may be lawfully offered for sale and therein only by
    persons permitted to sell such securities. No securities
    regulatory authority has expressed an opinion about these
    securities and it is an offence to claim otherwise. Vuzix
    Corporation has filed a registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-1</FONT>
    with the United States Securities and Exchange Commission under
    the United States Securities Act of 1933, as amended, with
    respect to these securities. See &#147;Plan of
    Distribution&#148;.</FONT></I>
</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>PRELIMINARY PROSPECTUS</B>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">    <I><U><FONT style="font-family: 'Times New Roman', Times">Initial
    Public
    Offering</FONT></U><FONT style="font-family: 'Times New Roman', Times">
    </FONT></I></TD>
    <TD nowrap align="right">    <I><FONT style="font-family: 'Times New Roman', Times">
    </FONT></I><FONT style="font-family: 'Times New Roman', Times">June&#160;30,
    2009
    </FONT></TD>
</TR>

</TABLE>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <IMG src="o55928o5592800.gif" alt="(VUZIX CORPORATION LOGO)">
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 21pt">VUZIX CORPORATION</FONT></B>
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 14pt">UP TO
    CDN$&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;</FONT></B>
</DIV>

<DIV style="margin-top: 1pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 18pt">Up
    to&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    Units</FONT></B>
</DIV>

<DIV style="margin-top: 2pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>(each Unit consisting of one share of common stock and
    one-half of one common stock purchase warrant)</B>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 15%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=540 length=84 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-size: 8pt">This prospectus qualifies the
    distribution (the &#147;Offering&#148;) of up
    to&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    units (the&#160;&#147;Units&#148;) in the capital of Vuzix
    Corporation (&#147;Vuzix&#148;, the&#160;&#147;Company&#148;,
    &#147;us&#148; or &#147;we&#148;), at a price of
    Cdn$&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    per Unit (the &#147;Offering Price&#148;). Each Unit is
    comprised of one share of our common stock, with a par value of
    US$0.001 per share (each, a &#147;Share&#148; and collectively,
    the &#147;Shares&#148;) and one-half of one common stock
    purchase warrant (each whole warrant being a
    &#147;Warrant&#148;). The Warrants will be created and issued
    pursuant to the terms of a warrant indenture (the &#147;Warrant
    Indenture&#148;) dated as of the closing date between us and
    Computershare Trust&#160;Company of Canada, as warrant agent
    thereunder. Each Warrant will entitle its holder to purchase one
    share of our common stock at a price of
    Cdn$&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    per share at any time
    for&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    months after the closing date of the Offering. The Units are
    being offered concurrently in each of the provinces of Canada
    other than Qu&#233;bec pursuant to this prospectus and in the
    United States pursuant to a registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-1</FONT>
    (the &#147;U.S. Prospectus&#148;) filed with the United States
    Securities and Exchange Commission. The full text of the U.S.
    Prospectus is included in and forms a part of this prospectus.
    We have engaged Canaccord Capital Corporation and Bolder
    Investment Partners, Ltd. (collectively,
    the&#160;&#147;Agents&#148;) to act as our agents in connection
    with the sale of the Units on a best efforts basis. Subject to
    compliance with applicable laws, the Offering&#160;Price of the
    Units will be determined by negotiation between us and the
    Agents. In connection with the Offering, the Agents may
    over-allot or effect transactions which stabilize or maintain
    the market price of the shares at levels other than those which
    may otherwise exist in the open market.
    See&#160;&#147;Plan&#160;of Distribution&#148;.
    </FONT>
</DIV>

<DIV style="margin-top: 4pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <FONT style="font-size: 8pt">There is currently no market
    through which the Units or the Shares and Warrants comprising
    the Units may be sold and purchasers may not be able to resell
    the Shares or Warrants purchased under this prospectus. This may
    affect the pricing of the securities in the secondary market,
    the transparency and availability of trading prices, the
    liquidity of the securities and the extent of issuer regulation.
    An investment in the Units is subject to a number of risks that
    should be considered by a prospective purchaser. Investors
    should carefully consider the risk factors described under
    &#147;Risk Factors&#148; in the U.S. Prospectus before
    purchasing the Units. We have applied to list the shares of our
    common stock (including the Shares) on the TSX Venture Exchange
    (the
    <FONT style="white-space: nowrap">&#147;TSX-V&#148;).</FONT>
    Listing will be subject to us fulfilling all of the listing
    requirements of the
    <FONT style="white-space: nowrap">TSX-V.</FONT> We do
    not intend to list the Warrants on the
    <FONT style="white-space: nowrap">TSX-V</FONT> or any
    other securities exchange.
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<CENTER style="font-size: 1pt; width: 37%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=540 length=204 -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B><FONT style="font-size: 14pt">PRICE
    CDN$&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    PER UNIT</FONT></B>
</DIV>

<CENTER style="font-size: 1pt; width: 37%; border-bottom: 1pt solid #000000"></CENTER><!-- callerid=999 iwidth=540 length=204 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="46%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="17%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="17%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="17%">&nbsp;</TD>	<!-- colindex=04 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Price to the Public</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Agents&#146;
    Commissions<SUP style="font-size: 85%; vertical-align: top">(1),(2)</SUP></B>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Net Proceeds to
    Vuzix<SUP style="font-size: 85%; vertical-align: top">(3)</SUP></B>

</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Per Unit
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    Cdn$&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    Cdn$&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    Cdn$&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    Total
    Offering<SUP style="font-size: 85%; vertical-align: top">(4)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    Cdn$&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    Cdn$&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    Cdn$&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 2pt; margin-left: 0%; width: 11%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=540 length=60 -->



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Notes
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (1)&#160;
</TD>
    <TD align="left">    We have retained the Agents to solicit subscriptions for the
    Units on a best efforts basis. As consideration for their
    services, the Agents will receive: (i)&#160;a commission equal
    to 8% of the gross proceeds of the Offering; (ii)&#160;options
    (the &#147;Compensation Options&#148;) entitling the Agents to
    purchase that number of Shares and Warrants equal to 12.5% of
    the aggregate number of Shares and Warrants sold under the
    Offering (including the Shares and Warrants issued upon exercise
    of the Over-Allotment Option), at the Offering Price per Share
    and Warrant, for a period of 12&#160;months from the closing
    date; and (iii)&#160;a due diligence fee of Cdn$15,000. The
    Agents will also be reimbursed for their reasonable fees and
    expenses including the reasonable legal fees and disbursements
    of legal counsel to the Agents. This prospectus also qualifies
    the distribution of that number of Compensation Options
    entitling the Agents to acquire up to 10% of the Shares and
    Warrants sold under the Offering (including pursuant to the
    exercise of the Over-Allotment Option referred to below). The
    distribution of the balance of the Compensation Options
    (entitling the Agents to acquire up to 2.5% of the number of
    Shares and Warrants sold under the Offering) is not qualified
    under this prospectus and such securities will be issued to the
    Agents pursuant to exemptions from the prospectus and
    registration requirements of applicable securities legislation
    and will be subject to resale restrictions under applicable
    securities legislation.
</TD>
</TR>


<TR style="line-height: 2pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (2)&#160;
</TD>
    <TD align="left">    In consideration of certain fiscal advisory services rendered by
    the Agents to us pursuant to a fiscal advisory fee agreement
    between us and the Agents dated June&#160;29, 2009 (the
    &#147;Fiscal Advisory Fee Agreement&#148;), we have agreed to
    issue to the Agents that number of shares of our common stock
    equal to, depending on the gross proceeds of the Offering,
    between 1.0% and 2.0% of the number of issued and outstanding
    shares of our common stock outstanding on the closing of the
    Offering. The distribution of these shares to the Agents
    pursuant to the Fiscal Advisory Fee Agreement is not qualified
    by this prospectus. Such shares will be issued pursuant to
    exemptions from the prospectus and registration requirements of
    applicable securities legislation and will be subject to resale
    restrictions under applicable securities legislation. See
    &#147;Material Contracts&#148;.
</TD>
</TR>


<TR style="line-height: 2pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (3)&#160;
</TD>
    <TD align="left">    Before deducting the expenses of the Offering estimated at
    Cdn$&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    which, together with the Agents&#146; commission and fees, will
    be paid by us out of the proceeds of the Offering.
</TD>
</TR>


<TR style="line-height: 2pt; font-size: 1pt"><TD>&nbsp;</TD></TR>




<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (4)&#160;
</TD>
    <TD align="left">    We have granted the Agents an over-allotment option (the
    &#147;Over-Allotment Option&#148;), exercisable in whole or in
    part at any time for a period of 30&#160;days from the date of
    the closing of the Offering, to sell up to an aggregate number
    of additional Shares and Warrants, up to the lesser of the
    Agents&#146; over-allocation position determined at the time of
    closing of the Offering
    and&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    Shares
    and&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    Warrants (15% of the number of Shares and whole Warrants offered
    by us under this prospectus) or any combination thereof at a
    price of
    Cdn$&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    per Share and
    Cdn$&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    per Warrant. For greater clarity, these Warrants will only be
    issued upon exercise of the Over-Allotment Option for the
    purpose of distribution of Units to purchasers. The aggregate
    number of Shares and Warrants issuable to purchasers pursuant to
    the Offering shall not
    exceed&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    Shares
    and&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    Warrants, respectively. The Over-Allotment Option and the Shares
    and Warrants issuable on exercise thereof are qualified for
    distribution under this prospectus regardless of whether the
    over-allocation position is ultimately filled through the
    exercise of the Over-Allotment Option or secondary market
    purchases. If the Over-Allotment Option is exercised in full,
    the aggregate price to the public, the Agents&#146; commission
    and the net proceeds to Vuzix will be
    Cdn$&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;,
    Cdn$&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    and
    Cdn$&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;,
    respectively. The expenses associated with any exercise of the
    Over-Allotment Option, together with the Agents&#146;
    commission, will be paid by us. See &#147;Plan of
    Distribution&#148;.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">(Continued on the next
    page)</FONT></I>
</DIV>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 94%; margin-left: 3%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Alternate page for Canadian Prospectus</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">
&nbsp;
</DIV><DIV style="margin-top: 0pt; font-size: 1pt">&nbsp;</DIV>
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 93%; margin-left: 3%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I><FONT style="font-size: 8pt">(Continued from previous
    page)</FONT></I>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date hereof, we are an &#147;IPO Venture Issuer&#148;
    (defined under National Instrument
    <FONT style="white-space: nowrap">41-101</FONT> as an
    issuer that does not have any of its securities listed or
    quoted, has not applied to list or quote any of its securities,
    and does not intend to apply to list or quote any of its
    securities, on the Toronto Stock Exchange, a U.S. marketplace,
    or a marketplace outside of Canada and the United States of
    America other than the Alternative Investment Market of the
    London Stock Exchange or the PLUS markets operated by PLUS
    Markets Group plc.). See &#147;Risk Factors&#148; in the U.S.
    Prospectus. In connection with this Offering, the Agents may,
    subject to applicable laws, over-allot or effect transactions
    that stabilize or maintain the price of the Shares at levels
    other than those which otherwise might prevail on the open
    market. See &#147;Plan of Distribution&#148;.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table summarizes the options granted by us to the
    Agents pursuant to the Offering:
</DIV>

<DIV style="margin-top: 9pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="36%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="21%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="5%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="19%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
    <TD width="5%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="13%">&nbsp;</TD>	<!-- colindex=04 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Maximum Number of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Agents&#146; Position</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Securities Held</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Exercise Period</B>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Exercise Price</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Over-Allotment
    Option<SUP style="font-size: 85%; vertical-align: top">(1)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    &#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;Shares
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="bottom">
    30 days from the closing
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;per
    Share
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    &#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;Warrants
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="bottom">
    of the Offering
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;per
    Warrant
</TD>
</TR>
<TR valign="bottom" style="line-height: 9pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Compensation
    Options<SUP style="font-size: 85%; vertical-align: top">(1),(2)</SUP>

</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="bottom">
    12.5% of the number of
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="bottom">
    12 months from the
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="bottom">
    $&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;
    per Unit
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="bottom">
    Shares and Warrants sold
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="bottom">
    closing of the Offering
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="bottom">
    under the Offering
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="bottom">
    (including upon exercise of
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    the&#160;Over-Allotment&#160;Option)
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 9pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Total Securities under Option
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 2pt; margin-left: 0%; width: 11%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=528 length=60 -->



<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Notes
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (1)&#160;
</TD>
    <TD align="left">    Assuming exercise in full of the Over-Allotment Option.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (2)&#160;
</TD>
    <TD align="left">    This prospectus also qualifies the distribution of that number
    of Compensation Options entitling the Agents to acquire up to
    10% of the Shares and Warrants sold under the Offering
    (including the Shares and Warrants issued upon exercise of the
    Over-Allotment Option). The distribution of the balance of the
    Compensation Options (entitling the Agents to acquire up to 2.5%
    of the number of Shares and Warrants sold under the Offering) is
    not qualified under this prospectus and such portion of the
    Compensation Options will be issued to the Agents pursuant to
    exemptions from the prospectus and registration requirements of
    applicable securities legislation and will be subject to resale
    restrictions under applicable securities legislation.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A purchaser who acquires Shares or Warrants forming part of the
    Agents&#146; over-allocation position acquires those Shares and
    Warrants under this prospectus, regardless of whether the
    over-allocation position is ultimately filled through the
    exercise of the Over-Allotment Option or secondary market
    purchases. See &#147;Plan of Distribution&#148;.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Agents, as agents on behalf of the Company, conditionally
    offer the Units qualified under this prospectus, subject to
    prior sale, if, as and when issued by us and accepted by the
    Agents in accordance with the conditions contained in the agency
    agreement referred to under &#147;Plan of Distribution&#148; and
    subject to the approval of certain legal matters on our behalf
    by Wildeboer Dellelce LLP as to certain matters of Canadian law
    and Boylan, Brown, Code, Vigdor&#160;&#038; Wilson, LLP as to
    certain matters of U.S. law and on behalf of the Agents by
    McCullough O&#146;Connor Irwin LLP as to certain matters of
    Canadian law and Dorsey&#160;&#038; Whitney LLP as to certain
    matters of U.S. law. The Agents may offer the Units at prices
    lower than stated above. See &#147;Plan of Distribution&#148;.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The financial statements included in this prospectus have not
    been prepared in accordance with Canadian generally accepted
    accounting principles and may not be comparable to financial
    statements of a Canadian issuer. See &#147;Notice to Investors
    Regarding GAAP&#148;.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Subscriptions will be received subject to rejection or allotment
    in whole or in part, and the Agents reserve the right to close
    the subscription books at any time without notice. It is
    expected that the closing of the Offering will occur on or
    about&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;,
    2009 or such other date as the Company and the Agents may agree,
    which in any event shall not be later
    than&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;,
    2009. One or more book-entry only certificates representing the
    Shares and the Warrants, respectively, to be issued or sold in
    this Offering will be issued in registered form to The Canadian
    Depository for Securities Limited (&#147;CDS&#148;), or to its
    nominee, and will be deposited with CDS on the date of closing.
    A purchaser of the Units will receive only a customer
    confirmation from the registered dealer through which the Units
    are purchased.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Vuzix is incorporated, continued or otherwise organized under
    the laws of a foreign jurisdiction. Although we have appointed
    Wildeboer Dellelce Corporate Services Inc. as our agent for
    service of process in Toronto, Ontario, it may not be possible
    for investors to enforce judgments obtained in Canada against
    us. See &#147;Enforcement of Legal Rights&#148;.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Unless the context requires otherwise, references to the
    &#147;Company&#148;, &#147;Vuzix&#148;, &#147;we&#148;,
    &#147;us&#148;, or &#147;our&#148; refer to Vuzix Corporation
    and its subsidiary.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    CDN-2
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="width: 93%; margin-left: 3%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Alternate page for Canadian Prospectus</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">
&nbsp;
</DIV><DIV style="margin-top: 0pt; font-size: 1pt">&nbsp;</DIV>
</DIV><!-- END PAGE WIDTH -->
<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->
<DIV align="left">
<!-- TOC -->
</DIV>

<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">TABLE OF
    CONTENTS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>



<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 9pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="79%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="4%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="17%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B><FONT style="font-size: 9pt">Page</FONT></B>
</DIV>
</TD>
</TR>
<TR style="line-height: 5pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <A HREF='#601'>CURRENCY AND EXCHANGE RATE DATA</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    CDN-3
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <A HREF='#602'>NOTICE TO INVESTORS REGARDING GAAP</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    CDN-3
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <A HREF='#603'>CONTINUOUS DISCLOSURE</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    CDN-3
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <A HREF='#606'>ENFORCEMENT OF LEGAL RIGHTS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    CDN-4
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <A HREF='#607'>CERTAIN CANADIAN FEDERAL INCOME TAX
    CONSIDERATIONS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    CDN-4
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <A HREF='#608'>AUDITORS, TRANSFER AGENTS&#160;&#038;
    REGISTRARS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    CDN-7
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <A HREF='#609'>PLAN OF DISTRIBUTION</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    CDN-7
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <A HREF='#610'>PRIOR SALES</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    CDN-9
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <A HREF='#611'>MATERIAL CONTRACTS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    CDN-10
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <A HREF='#612'>ELIGIBILITY FOR INVESTMENT</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    CDN-10
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <A HREF='#613'>PURCHASERS&#146; STATUTORY RIGHTS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    CDN-11
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <A HREF='#614'>UNITED STATES PROSPECTUS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    CDN-11
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <A HREF='#615'>CERTIFICATE OF VUZIX CORPORATION</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    CDN-C-1
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -9pt; margin-left: 9pt">
    <A HREF='#616'>CERTIFICATE OF THE AGENTS</A>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    CDN-C-2
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>
<A name='601'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CURRENCY
    AND EXCHANGE RATE DATA</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>We measure and report our financial results in U.S.
    dollars.</B> The following table sets forth, for the periods
    indicated, the high, low, average and period-end noon buying
    rates of exchange for one U.S. dollar in Canadian dollars
    published by the Bank of Canada. Although obtained from sources
    believed to be reliable, the data is provided for informational
    purposes only, and the Bank of Canada does not guarantee the
    accuracy or completeness of the data. No representation is made
    that the U.S. dollar amounts have been, could have been or could
    be converted into Canadian dollars at the noon buying rate on
    such dates or any other dates.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="47%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
    <TD width="4%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="4%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="4%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
    <TD width="4%">&nbsp;</TD>	<!-- colindex=06 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=06 type=lead -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=06 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=06 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="10" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Year Ended December 31</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="6" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Period Ended March 31</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2007</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2006</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2009</B>
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>2008</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Highest rate during period
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.2969
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.1853
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.1726
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.3000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1.0324
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Lowest rate during period
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.9719
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.9170
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.0990
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.1823
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.9719
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Average rate during period
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.0660
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.0748
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.1342
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.2456
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.0042
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Rate at the end of period
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.2246
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    0.9881
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.1653
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.2602
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1.0279
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    On June&#160;29, 2009, the noon buying rate of the Bank of
    Canada was U.S.$1.00 = Cdn$1.1583. <B>Unless otherwise
    specified, all references to &#147;dollars&#148;,
    &#147;U.S.$&#148; or &#147;$&#148; in this prospectus are to
    United States dollars and references to &#147;Cdn$&#148; in this
    prospectus are to Canadian dollars.</B>
</DIV>

<DIV style="margin-top: 21pt; font-size: 1pt">&nbsp;</DIV>
<A name='602'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">NOTICE TO
    INVESTORS REGARDING GAAP</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The financial statements included in this prospectus have been
    prepared in accordance with U.S. generally accepted accounting
    principles which differ in certain material respects from
    Canadian generally accepted accounting principles. As we will
    become an &#147;SEC issuer&#148; (as such term is defined in
    National Instrument
    <FONT style="white-space: nowrap">52-107</FONT> of
    the Canadian Securities Administrators), we are not required to
    provide, and have not provided, a reconciliation of our
    financial statements to Canadian generally accepted accounting
    principles.
</DIV>

<DIV style="margin-top: 21pt; font-size: 1pt">&nbsp;</DIV>
<A name='603'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CONTINUOUS
    DISCLOSURE</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Upon the filing of the final prospectus with the securities
    regulatory authorities in each of the provinces of Canada other
    than Qu&#233;bec we will become a reporting issuer under the
    securities laws of such jurisdictions that provide for a
    reporting issuer regime. Pursuant to the rules of the securities
    regulatory authorities of such jurisdictions, we (or, in the
    case of insider reporting, our insiders) are generally exempt
    from the requirements of the laws of such jurisdictions relating
    to continuous disclosure, proxy solicitation and insider
    reporting. These rules generally permit us to comply with
    certain informational requirements applicable in the United
    States instead
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    CDN-3
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Alternate page for Canadian Prospectus</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">
&nbsp;
</DIV><DIV style="margin-top: 0pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    of the continuous disclosure requirements normally applicable in
    such Canadian jurisdictions, provided that the relevant
    documents are filed with the securities regulatory authorities
    in the relevant Canadian jurisdictions and are provided to
    security holders in Canada to the extent and in the manner and
    within the time required by applicable U.S. requirements.
</DIV>
<A name='606'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ENFORCEMENT
    OF LEGAL RIGHTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are incorporated under the laws of the State of Delaware in
    the United States of America and, accordingly, the rights and
    remedies generally available to shareholders under Canadian
    corporate statutes will not be available to investors who
    purchase under this prospectus. In addition, substantially all
    of our assets are located outside of Canada. Although we have
    appointed Wildeboer Dellelce Corporate Services Inc. as our
    agent for service of process in Ontario, it may not be possible
    for investors to collect from the Company judgments obtained in
    courts in Canada predicated on the civil liability provisions of
    applicable securities legislation in Canada.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In addition, a majority of our directors and officers and
    certain of the experts named in this prospectus reside outside
    of Canada. Furthermore, substantially all of the assets of such
    persons may also be located outside of Canada. It may not be
    possible for investors to effect service of process within
    Canada upon these directors and officers and experts referred to
    above. In addition, it may not be possible to enforce against
    the Company&#146;s directors and officers or certain of the
    experts named in this prospectus judgments obtained in Canadian
    courts predicated upon the civil liability provisions of
    applicable securities legislation in Canada.
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>
<A name='607'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CERTAIN
    CANADIAN FEDERAL INCOME TAX CONSIDERATIONS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following is, as of the date hereof, a summary of the
    principal Canadian federal income tax considerations generally
    applicable to a holder of Shares and Warrants:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="3%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    who is or is deemed to be a resident of Canada,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    who deals at arm&#146;s length with us,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    who is not affiliated with us,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    an interest in which would not be a &#147;tax shelter
    investment&#148; under the <I>Income Tax Act</I> (Canada) (the
    &#147;Tax Act&#148;),
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    who is not a &#147;financial institution&#148; or other taxpayer
    to which the &#147;mark to market&#148; rules in the Tax Act
    apply,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    who holds all Shares and Warrants solely as capital property,
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    who does not determine its &#147;Canadian tax results&#148; in a
    &#147;functional currency&#148;, each as defined in the Tax Act,
    and
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    for whom we are not at any material time a &#147;foreign
    affiliate&#148; for the purposes of the Tax Act,
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    at all material times for the purposes of the Tax Act.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A Share or a Warrant will generally be considered capital
    property of a holder unless the holder holds the Share or
    Warrant in the course of carrying on a business of buying and
    selling shares or warrants, or acquired the Shares or Warrants
    in a transaction or transactions considered to be an adventure
    in the nature of trade.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>This summary is of a general nature only and is not
    exhaustive of all Canadian federal income tax considerations
    that may be relevant to a particular holder. It is not, and
    should not be construed as, legal or tax advice to any
    particular holder. Consequently each holder is urged to consult
    the holder&#146;s own tax advisers with respect to the legal and
    tax consequences applicable to the holder&#146;s
    circumstances.</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This summary is based on the current provisions of the Tax Act
    and regulations thereunder in force as at the date hereof, all
    specific proposals to amend the Tax Act and regulations
    thereunder (the &#147;Proposed Amendments&#148;), publicly
    announced by or on behalf of the Minister of Finance (Canada)
    prior to the date hereof, and counsel&#146;s
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    CDN-4
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Alternate page for Canadian Prospectus</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">
&nbsp;
</DIV><DIV style="margin-top: 0pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    understanding of the current published administrative policies
    and assessing practices of the Canada Revenue Agency (the
    &#147;CRA&#148;). This summary assumes that the Proposed
    Amendments will be enacted as currently proposed, and that there
    will be no other material change to any relevant law or
    administrative practice, although no assurance can be given in
    these respects.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Except as otherwise indicated, this summary does not take into
    account or anticipate any change in any applicable law, and does
    not take into account any provincial, territorial or foreign tax
    law nor any income or other tax treaty, any of which may give
    rise to considerations that differ significantly from the
    Canadian federal income tax considerations discussed herein.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Currency</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    For the purposes of the Tax Act, each amount relating to a
    share, including dividends, adjusted cost bases and proceeds of
    disposition, must be expressed in Canadian dollars. Any relevant
    amount denominated in U.S. dollars generally must be converted
    into Canadian dollars based on the prevailing U.S. dollar
    exchange rate at the relevant time. Holders may therefore
    realize additional income, gains or losses by virtue of changes
    in foreign currency exchange rates.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Acquisition
    of Shares and Warrants</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The total Offering Price of a Unit to a holder must be allocated
    on a reasonable basis between the Share and the one-half of one
    Warrant to determine the cost of each for purposes of the Tax
    Act. For our purposes, we intend to allocate
    Cdn$&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    of the Offering Price of each Unit as consideration for the
    issue of each Share and
    Cdn$&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    of the issue price of each Unit for the issue of each one-half
    of one Warrant. Although we believe that this allocation is
    reasonable, it is not binding on the CRA or the holder. The
    holder&#146;s adjusted cost base of each Share comprising a part
    of each Unit will be determined by averaging the cost allocated
    to the Shares acquired pursuant to the offering with the
    adjusted cost base to the holder of all Shares owned by the
    holder immediately prior to such acquisition.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Exercise
    of Warrants</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    No gain or loss will be realized by a holder upon the exercise
    of a Warrant. When a Warrant is exercised, the holder&#146;s
    cost of the share of common stock acquired thereby will be the
    aggregate of the holder&#146;s adjusted cost base of such
    Warrant and the exercise price paid for the share of our common
    stock. The holder&#146;s adjusted cost base of the common stock
    so acquired will be determined by averaging such cost with the
    adjusted cost base to the holder of all shares of our common
    stock owned by the holder immediately prior to such acquisition.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Disposition
    and Expiry of Warrants</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A disposition or deemed disposition by a holder of a Warrant
    (other than upon the exercise thereof) will generally give rise
    to a capital gain (or capital loss) equal to the amount by which
    the proceeds of disposition, net of any reasonable costs of
    disposition, are greater (or less) than such holder&#146;s
    adjusted cost base of the Warrants. In the event of the expiry
    of an unexercised Warrant, the holder will realize a capital
    loss equal to the holder&#146;s adjusted cost base of such
    Warrant. The tax treatment of capital gains and capital losses
    is discussed in greater detail below under the subheading
    &#147;Capital Gains and Capital Losses&#148;.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Disposition
    of Shares</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A holder who disposes or is deemed to dispose of a share of our
    common stock generally will realize a capital gain (or capital
    loss) equal to the amount by which the proceeds of disposition
    of the share, less reasonable costs of disposition, exceed (or
    are less than) the adjusted cost base of such share to the
    holder. The tax treatment of capital gains and capital losses is
    discussed in greater detail below under the subheading
    &#147;Capital Gains and Capital Losses&#148;.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Capital
    Gains and Capital Losses</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The holder must include one half of any capital gain
    (&#147;taxable capital gain&#148;) realized by a holder in
    income, and may deduct one half of any capital loss
    (&#147;allowable capital loss&#148;) against taxable capital
    gains realized by a holder in
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    CDN-5
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Alternate page for Canadian Prospectus</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">
&nbsp;
</DIV><DIV style="margin-top: 0pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    the same year subject to the detailed rules in the Tax Act
    limiting the deduction of capital losses . The holder may deduct
    any excess of allowable capital losses against any net taxable
    capital gains realized in any of the three preceding taxation
    years or any subsequent taxation year, to the extent and under
    the circumstances permitted in the Tax Act. A holder resident in
    Canada who realizes a capital gain on the disposition of the
    Shares and pays United States tax as a result of the disposition
    may be eligible to claim a foreign tax credit or deduction under
    the Tax Act in respect of the United States tax payable to the
    extent and under the circumstances described in the Tax Act.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A holder that is a &#147;Canadian-controlled private
    corporation&#148; for the purposes of the Tax Act may be liable
    to pay an additional refundable tax of
    6<FONT style="vertical-align: text-top; font-size: 70%;">2</FONT>/<FONT style="font-size: 70%;">3</FONT>%
    on its &#147;aggregate investment income&#148; for the year,
    which will include any net taxable capital gains. Capital gains
    realized by a holder who is an individual (including most
    trusts) may be subject to alternative minimum tax.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Dividends
    on Shares</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A holder will be required to include in income the gross amount
    of any dividend, including amounts deducted for any United
    States or other foreign withholding tax that may be levied on
    the dividend, that the holder receives, or is deemed to receive,
    on a share of common stock. The holder, if an individual
    (including a trust), will not be entitled to the
    <FONT style="white-space: nowrap">gross-up</FONT> and
    dividend tax credit rules normally applicable to dividends
    received by individuals from taxable Canadian corporations. If
    the holder is a corporation, the holder will not be entitled to
    deduct the amount of the dividend in computing its taxable
    income.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The holder will, subject to the detailed rules in the Tax Act
    governing foreign tax credits and deductions in respect of
    foreign taxes, generally be entitled to claim a foreign tax
    credit against federal Canadian income tax, or a deduction in
    computing income, or both a foreign tax credit and a deduction,
    in respect of any United States or other foreign withholding tax
    levied on any such dividend.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Holders are advised to consult their own tax advisers with
    respect to the availability of a foreign tax credit or deduction
    in respect of any dividend received or deemed to be received on
    a share of common stock.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A holder that is a &#147;Canadian-controlled private
    corporation&#148; for the purposes of the Tax Act may be liable
    to pay an additional refundable tax of
    6<FONT style="vertical-align: text-top; font-size: 70%;">2</FONT>/<FONT style="font-size: 70%;">3</FONT>%
    on its &#147;aggregate investment income&#148; for the year,
    which will include dividends on the common stock.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Foreign
    Property Information Reporting</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Tax Act imposes information reporting requirements on most
    Canadian residents who hold &#147;specified foreign
    property&#148; having an aggregate cost amount of Cdn$100,000 at
    any time in a taxation year or fiscal period. The Shares will be
    specified foreign property for these purposes. Each holder
    should consult the holder&#146;s own tax advisers to determine
    whether the holder is or may be subject to these reporting
    requirements.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Proposals&#160;Regarding
    Foreign Investment Entities</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Proposed Amendments contain provisions that relate to the
    taxation of certain interests held by Canadian&#160;residents in
    certain non-resident entities, applicable for taxation years
    commencing after 2006 (the&#160;&#147;FIE&#160;Proposals&#148;),
    notwithstanding that they have yet to be passed into law.
    However, the January&#160;27, 2009 Federal Budget announced that
    the Government of Canada will review the existing FIE Proposals
    in light of submissions that it has received before proceeding
    with measures in the area.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Under the FIE Proposals, where a Canadian resident holds an
    interest such as a Share or rights to acquire shares (such as
    the Warrants), other than an &#147;exempt interest&#148;, in a
    corporation that is a &#147;foreign investment entity&#148;
    (a&#160;&#147;FIE&#148;) at the corporation&#146;s taxation
    year-end (as each of such terms is defined in the FIE
    Proposals), the Canadian resident generally will be required to
    include in computing income for the Canadian resident&#146;s
    taxation year that includes such year-end an amount in respect
    of such interest computed in one of three ways: (a)&#160;an
    imputed return calculated as a prescribed percentage of the
    holder&#146;s &#147;designated cost&#148; of such interest;
    (b)&#160;in certain circumstances, the annual accrued increase
    or decrease in the fair market value of the holder&#146;s
    interest; or (c)&#160;in certain other limited circumstances, a
    proportionate share of the FIE&#146;s income or loss for the
    year calculated using Canadian tax rules as specified in the FIE
    Proposals. For most holders, the method described in
    (a)&#160;would be applicable.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    CDN-6
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Alternate page for Canadian Prospectus</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">
&nbsp;
</DIV><DIV style="margin-top: 0pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will not, however, be a FIE at the end of a taxation year
    provided that either: (a)&#160;at such time, the &#147;carrying
    value&#148; of all of our &#147;investment property&#148; will
    not be greater than one-half of the &#147;carrying value&#148;
    of all our property; or (b)&#160;throughout the relevant
    taxation year, our principal undertaking will have been the
    carrying on of a business that is not an &#147;investment
    business&#148;. No assurances can be given that we will not be a
    FIE at the end of any of our taxation years or at any other
    times.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Even if we were a FIE for purposes of the FIE Proposals at the
    end of a taxation year, if the Shares or Warrants qualified as
    &#147;exempt interests&#148; for a particular holder at that
    time, the FIE Proposals would not apply in respect of such
    holder&#146;s Shares or Warrants, respectively. Generally, under
    the FIE Proposals, the Shares or Warrants would be an
    &#147;exempt interest&#148; to a particular Holder at the end of
    a particular taxation year if: (a)&#160;it was reasonable to
    conclude that the holder had no &#147;tax avoidance motive&#148;
    in respect of the Shares or Warrants, respectively, at that
    time; (b)&#160;throughout such period the Shares or Warrants,
    respectively, were an &#147;arm&#146;s length interest&#148; of
    the holder; and (c)&#160;throughout such period either
    (i)&#160;the Shares or Warrants, respectively, were listed on a
    designated stock exchange for the purposes of the Tax Act (which
    currently includes the
    <FONT style="white-space: nowrap">TSX-V)</FONT> or
    (ii)&#160;we were governed by and existed under the laws of a
    state of the United States and were a resident of the United
    States for the purposes of the
    <FONT style="white-space: nowrap">Canada-United</FONT>
    States Tax Convention (1980).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Holders should consult their own tax advisors regarding the FIE
    Proposals generally in respect of the Shares and Warrants,
    including the determination of whether or not they have a
    &#147;tax avoidance motive&#148; and whether or not the Shares
    or Warrants may at any time constitute an &#147;exempt
    interest&#148; to a holder.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    If we were a FIE, the FIE Proposals include complex provisions
    to relieve against double taxation of dividend received and
    amounts included in income under the FIE Proposals. Holders
    should consult their own tax advisors in this regard.
</DIV>
<A name='608'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">AUDITORS,
    TRANSFER AGENTS&#160;&#038; REGISTRARS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our auditors are Rotenberg&#160;&#038; Co. LLP, an independent
    registered public accounting firm, located in Rochester, New
    York.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The main transfer agent and registrar for our common stock is
    Computershare Trust Company, N.A. at its principal office
    located in Golden, Colorado. The co-transfer agent and registrar
    for our common stock is Computershare Investor Services, Inc. at
    its principal office located in Toronto, Ontario. The warrant
    agent for our Warrants is Computershare Trust Company of Canada
    at its principal office located in Toronto, Ontario.
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>
<A name='609'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PLAN OF
    DISTRIBUTION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We will enter into an agency agreement with the Agents with
    respect to the Units being offered by us. For a description of
    the terms of the agency agreement, see &#147;Underwriting&#148;
    in the U.S. Prospectus. This section supplements the disclosure
    contained under &#147;Underwriting&#148; in the U.S. Prospectus.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The obligations of the Agents may be terminated at their
    discretion on the basis of their assessment of the state of the
    financial markets and may also be terminated upon the occurrence
    of certain stated events.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Offering is being made concurrently in the United States and
    each of the provinces of Canada other than Qu&#233;bec. The
    Units will be offered in the United States through those Agents
    who are registered to offer the Units for sale in the United
    States, either directly or indirectly through their U.S.
    broker-dealer affiliates, or such other registered dealers as
    may be designated by the Agents. The Units will be offered in
    each of the provinces of Canada other than Qu&#233;bec through
    those Agents who are registered to offer the Units for sale in
    such provinces. Subject to applicable law, the Agents may offer
    the Units outside of the United States and Canada.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The Warrants will be created and issued pursuant to the terms of
    the Warrant Indenture to be dated as of the closing date between
    us and Computershare Trust&#160;Company of Canada, as warrant
    agent thereunder. The Warrant Indenture will, among other
    things, include provisions for the appropriate adjustment in the
    class, number and price of the Shares to be issued upon exercise
    of the Warrants upon the occurrence of certain events, including
    any subdivision, consolidation or reclassification of the shares
    of our common stock, the payment of stock dividends
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    CDN-7
</DIV><!-- END PAGE WIDTH -->
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Alternate page for Canadian Prospectus</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">
&nbsp;
</DIV><DIV style="margin-top: 0pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    and any amalgamation, arrangement or merger. No fractional
    shares will be issued upon exercise of the Warrants. The Shares
    issuable upon exercise of the Warrants, when issued upon
    exercise of a Warrant, will be fully paid and non-assessable.
    The holder of a Warrant will not possess any rights as a
    shareholder until the holder exercises the Warrant. A Warrant
    may be exercised upon surrender of the certificate representing
    such Warrant on or before the expiry date of the Warrant at the
    office of the warrant agent, with the exercise form found on the
    back of the Warrant&#160;certificate completed and executed as
    indicated, accompanied by payment of the exercise price (by
    money order, wire transfer, bank draft or certified cheque
    payable to the order of &#147;Vuzix Corporation&#148;) for the
    number of shares of our common stock with respect to which the
    Warrant is being exercised. The foregoing discussion of material
    terms and provisions of the Warrants is qualified in its
    entirety by reference to the detailed provisions of the Warrant
    Indenture, a copy of which will be available on
    <U>www.sedar.com</U> and a copy of which may be obtained
    by&#160;contacting&#160;us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to policy statements of certain Canadian provincial
    securities commissions and the Universal Market Integrity Rules
    for Canadian Marketplaces, the Agents may not, throughout the
    period of distribution, bid for or purchase Shares or Warrants
    except in accordance with certain permitted transactions,
    including market stabilization and passive market making
    activities. Subject to the foregoing, the Agents may engage in
    stabilizing transactions, which involve making bids for,
    purchasing and selling the Shares or Warrants in the open market
    for the purpose of preventing or retarding a decline in the
    market price of our Shares or Warrants while the Offering is in
    progress. These stabilizing transactions may include making
    short sales of the Units or Shares, which involve the sale by
    the Agents of a greater number of the Shares or Warrants than
    are being sold in the Offering. Short sales may be
    &#147;covered&#148; shorts, which are short positions in an
    amount not greater than the Agents&#146; Over-Allotment Option,
    or may be &#147;naked&#148; shorts, which are short positions in
    excess of that amount. The Agents may close out any covered
    short position either by exercising their Over-Allotment Option,
    in whole or in part, or by purchasing the Shares or Warrants in
    the open market. In making this determination, the Agents will
    consider, among other things, the price of the Shares and
    Warrants available for purchase in the open market compared to
    the price at which the Agents may purchase the Shares or
    Warrants through the Over-Allotment Option. A naked short
    position is more likely to be created if the Agents are
    concerned that there may be downward pressure on the price of
    the Shares or Warrants in the open market that could adversely
    affect investors who purchase in the Offering. To the extent
    that the Agents create a naked short position, they will
    purchase the Shares or Warrants in the open market to cover the
    position. These activities may have the effect of raising or
    maintaining the market price of the Shares or Warrants or
    preventing or retarding a decline in the market price of the
    Shares or Warrants, and, as a result, the price of the Shares or
    Warrants may be higher than the price that otherwise might exist
    in the open market. Such transactions, if commenced, may be
    discontinued at any time. The Agents may carry out these
    transactions on the
    <FONT style="white-space: nowrap">TSX-V,</FONT> in
    the over the counter market or otherwise.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>There is no current market through which the Shares or
    Warrants may be sold and purchasers may not be able to resell
    securities purchased under this prospectus. See &#147;Risk
    Factors&#148; in the U.S. Prospectus.</B> We have applied to
    list the Shares distributed under this prospectus on the
    <FONT style="white-space: nowrap">TSX-V.</FONT>
    Listing will be subject to the Company fulfilling all listing
    requirements of the
    <FONT style="white-space: nowrap">TSX-V.</FONT>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As of the date hereof, we are an &#147;IPO Venture Issuer&#148;
    (defined under National Instrument
    <FONT style="white-space: nowrap">41-101</FONT> as an
    issuer that does not have any of its securities listed or
    quoted, has not applied to list or quote any of its securities,
    and does not intend to apply to list or quote any of its
    securities, on the Toronto Stock Exchange, a U.S. marketplace,
    or a marketplace outside of Canada and the United States of
    America other than the Alternative Investment Market of the
    London Stock Exchange or the PLUS markets operated by PLUS
    Markets Group plc.).
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have granted the Agents the Over-Allotment Option,
    exercisable in whole or in part at any time for a period of
    30&#160;days from the date of the closing of the Offering, to
    sell up to an aggregate number of additional Shares and
    Warrants, equal to the lesser of the Agents&#146;
    over-allocation position determined at the time of closing of
    the Offering
    and&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    Shares
    and&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    Warrants (being 15% of the number of Shares and Warrants offered
    by us under this prospectus) or any combination thereof. For
    greater clarity, these Warrants will only be issued upon
    exercise of the Over-Allotment Option for the purpose of
    distribution of whole Units to purchasers. The aggregate number
    of Shares and Warrants issuable to purchasers pursuant to the
    Offering shall not
    exceed&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    Shares
    and&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    Warrants, respectively. The Over-Allotment Option and the Shares
    and Warrants issuable on exercise thereof are qualified for
    distribution under this prospectus regardless of whether the
    over-allocation position is ultimately filled
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    CDN-8
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Alternate page for Canadian Prospectus</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">
&nbsp;
</DIV><DIV style="margin-top: 0pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    through the exercise of the Over-Allotment Option or secondary
    market purchases. If the Over-Allotment Option is exercised in
    full, the aggregate price to the public, the Agents&#146;
    commission and the net proceeds to Vuzix will be
    $&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;,
    $&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;
    and
    $&#160;&#160;&#160;&#160;<FONT style="font-family: Wingdings; font-variant: normal">&#108;</FONT>&#160;&#160;&#160;&#160;,
    respectively. The expenses&#160;associated with any exercise of
    the Over-Allotment Option, together with the Agents&#146;
    commission, will be paid by us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As consideration for their services, the Agents will receive:
    (i)&#160;a commission equal to 8% of the gross proceeds of the
    Offering; (ii)&#160;Compensation Options entitling the Agents to
    purchase that number of Shares and Warrants equal to 12.5% of
    the aggregate number of Shares and Warrants sold under the
    Offering (including the Shares and Warrants issued upon exercise
    of the Over-Allotment Option), at the Offering Price per Share
    and Warrant, for a period of 12&#160;months from the closing
    date; and (iii)&#160;a due diligence fee of Cdn$15,000. The
    Agents will also be reimbursed for their reasonable fees and
    expenses including the reasonable legal fees and disbursements
    of legal counsel to the Agents.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus also qualifies the distribution of that number
    of Compensation Options entitling the Agents to acquire up to
    10% of the Shares and Warrants sold under the Offering
    (including pursuant to the exercise of the Over-Allotment
    Option). The distribution of the balance of the Compensation
    Options (entitling the Agents to acquire up to 2.5% of the
    number of Shares and Warrants sold under the Offering) is not
    qualified under this prospectus and such portion of the
    Compensation Options will be issued to the Agents pursuant to
    exemptions from the prospectus and registration requirements of
    applicable securities legislation and will be subject to resale
    restrictions under applicable securities legislation.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In consideration of certain fiscal advisory services rendered by
    the Agents to us pursuant to the Fiscal Advisory Fee Agreement,
    we have agreed to issue to the Agents that number of shares of
    our common stock equal to, depending on the gross proceeds of
    the Offering, between 1.0% and 2.0% of the number of issued and
    outstanding shares of our common stock outstanding on the
    closing of the Offering. The distribution of these shares of our
    common stock to the Agents pursuant to the Fiscal Advisory Fee
    Agreement is not qualified by this prospectus. Such shares will
    be issued pursuant to exemptions from the prospectus and
    registration requirements of applicable securities legislation
    and will be subject to resale restrictions under applicable
    securities legislation. See &#147;Material Contracts&#148;.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>
<A name='610'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PRIOR
    SALES</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the past 12&#160;months, shares of our common stock or
    securities convertible or exercisable for shares of our common
    stock have been issued by us as follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="32%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="24%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=03 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=03 type=body -->
    <TD width="6%" align="left">&nbsp;</TD>	<!-- colindex=03 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="5%" align="right">&nbsp;</TD>	<!-- colindex=04 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=04 type=body -->
    <TD width="5%" align="left">&nbsp;</TD>	<!-- colindex=04 type=hang1 -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=05 type=gutter -->
    <TD width="4%" align="right">&nbsp;</TD>	<!-- colindex=05 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=05 type=body -->
    <TD width="4%" align="left">&nbsp;</TD>	<!-- colindex=05 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Number of Shares<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Issue Price<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    <B>Nature of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>of Common Stock<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Per Share of<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom">
    <B>Aggregate<BR>
    </B>
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="left" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Date of Issuance</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Securities Issued</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Issued or Issuable</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Common Stock</B>
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="3" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>Issue Price</B>
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    May 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    options<SUP style="font-size: 85%; vertical-align: top">(1)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,335,940
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.15
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    January 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    shares&#160;of&#160;common&#160;stock<SUP style="font-size: 85%; vertical-align: top">(2)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,000,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.15
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    300,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    January 2009
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    warrants<SUP style="font-size: 85%; vertical-align: top">(2)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,000,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.20
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    December 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    warrants<SUP style="font-size: 85%; vertical-align: top">(3)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    120,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.01
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    December 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    warrants<SUP style="font-size: 85%; vertical-align: top">(4)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    11,583
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.15
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    November 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    options<SUP style="font-size: 85%; vertical-align: top">(5)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    142,864
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.15
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    November 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    options<SUP style="font-size: 85%; vertical-align: top">(6)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    446,424
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.15
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    September 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="bottom">
    shares of common
    stock<SUP style="font-size: 85%; vertical-align: top">(7)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    444,447
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.15
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    66,667
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    August 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="bottom">
    shares of common
    stock<SUP style="font-size: 85%; vertical-align: top">(8)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    2,000,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.15
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    300,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    July 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    options<SUP style="font-size: 85%; vertical-align: top">(9)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,328,000
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.20
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    July 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="bottom">
    shares of common
    stock<SUP style="font-size: 85%; vertical-align: top">(10)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    13,364,899
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.15
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    2,004,735
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    July 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    warrants<SUP style="font-size: 85%; vertical-align: top">(11)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    66,667
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.01
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    June 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    warrants<SUP style="font-size: 85%; vertical-align: top">(12)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    157,504
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.01
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    June 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
    warrants<SUP style="font-size: 85%; vertical-align: top">(13)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    24,945
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.20
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    &#151;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    June 2008
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="bottom">
    shares of common
    stock<SUP style="font-size: 85%; vertical-align: top">(14)</SUP>

</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    1,552,936
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    0.01
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    15,529
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 2pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=60 -->



<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 8pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <FONT style="font-family: 'Times New Roman', Times">Notes:
    </FONT>
</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (1)&#160;</TD>
    <TD align="left">
    Options were granted under our stock option plan to 44 employees
    and are exercisable for ten years from the date of grant,
    subject to vesting over four years from the date of grant.
</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    CDN-9
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Alternate page for Canadian Prospectus</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">
&nbsp;
</DIV><DIV style="margin-top: 0pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (2)&#160;
</TD>
    <TD align="left">    Shares of our common stock, together with a warrant to purchase
    an additional 1,000,000&#160;shares of our common stock, were
    issued to an individual investor and such warrants are
    exercisable for five years from the date of issue.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (3)&#160;
</TD>
    <TD align="left">    Warrants were issued to a consultant in consideration for
    services and are exercisable for five years from the date of
    issuance.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (4)&#160;
</TD>
    <TD align="left">    Warrants were issued to a consultant in consideration for
    services and are exercisable for five years from the date of
    issuance.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (5)&#160;
</TD>
    <TD align="left">    Options were granted under our stock option plan to our external
    director as his annual retainer for serving and are exercisable
    for ten years from the date of grant, subject to vesting over
    12&#160;months from the date of grant.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (6)&#160;
</TD>
    <TD align="left">    Options were issued to one consultant and two employees and are
    exercisable for ten years from the date of grant, subject to
    vesting over four years from the date of grant.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (7)&#160;
</TD>
    <TD align="left">    Shares of our common stock were issued to a consultant for
    services.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (8)&#160;
</TD>
    <TD align="left">    Shares of our common stock were issued to an individual investor.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (9)&#160;
</TD>
    <TD align="left">    Options were issued under our 2007 stock option plan to seven
    employees and are exercisable for ten years from the date of the
    grant subject to vesting over four years from the date of grant.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (10)&#160;
</TD>
    <TD align="left">    Shares of our common stock were issued to 46 individual and
    institutional investors.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (11)&#160;
</TD>
    <TD align="left">    Warrants were issued to a consultant in consideration for
    services and are exercisable for five years from the date of
    issuance.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (12)&#160;
</TD>
    <TD align="left">    Warrants were issued to a consultant in consideration for
    services and are exercisable for five years from the date of
    issuance.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (13)&#160;
</TD>
    <TD align="left">    Warrants were issued to a consultant in consideration for
    services and are exercisable for five years from the date of
    issuance.
</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 8pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>    (14)&#160;
</TD>
    <TD align="left">    Shares issued to 51 investors pursuant to the exercise of then
    outstanding warrants.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Except for the Shares and Warrants issuable pursuant to the
    Offering (including pursuant to the exercise of the
    <FONT style="white-space: nowrap">Over-Allotment</FONT>
    Option and the issuance of shares of our common stock pursuant
    to the Fiscal Advisory Fee Agreement), and the shares of our
    common stock issuable pursuant to the conversion of outstanding
    convertible securities if, as and when converted by the holders
    thereof, as more particularly described in the U.S. Prospectus,
    we do not have a present intention to issue any other securities.
</DIV>

<DIV style="margin-top: 21pt; font-size: 1pt">&nbsp;</DIV>
<A name='611'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">MATERIAL
    CONTRACTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The only material contracts not in the ordinary course of
    business entered into since the beginning of the last financial
    year ending before the date of the prospectus, or before the
    beginning of such financial year where such contract is still in
    effect, or to be entered into, on or before the closing of the
    Offering, are as follows:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="5%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    (a)&#160;
</TD>
    <TD align="left">
    Warrant Indenture. See &#147;Plan of Distribution&#148;.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    (b)&#160;
</TD>
    <TD align="left">
    Shareholders Agreement dated as of October&#160;11, 2000 by and
    among Vuzix and Shareholders (as defined therein). See
    &#147;Description of Capital Stock&#160;&#151; Registration
    Rights&#148; and Exhibit&#160;10.9 in the U.S.&#160;Prospectus.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    (c)&#160;
</TD>
    <TD align="left">
    Technology Purchase and Royalty Agreement dated as of
    December&#160;23, 2005 between Vuzix and New&#160;Light
    Industries, Ltd. See &#147;Description of Capital
    Stock&#160;&#151;  Registration Rights&#148; and
    Exhibit&#160;10.12 in the U.S. Prospectus.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    (d)&#160;
</TD>
    <TD align="left">
    Demand Note in the original principal amount of $247,690.92 by
    Vuzix to the order of Paul J. Travers. See Exhibit&#160;10.17 in
    the U.S. Prospectus.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    (e)&#160;
</TD>
    <TD align="left">
    Loan Agreement dated as of October 2008 by and between the Vuzix
    and Paul J. Travers. See Exhibit&#160;10.18 in the U.S.
    Prospectus.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    (f)&#160;
</TD>
    <TD align="left">
    Promissory Note dated as of October 2008 by Vuzix to the order
    of Paul J. Travers. See Exhibit&#160;10.19 in the U.S.
    Prospectus.
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    (g)&#160;
</TD>
    <TD align="left">
    Fiscal Advisory Fee Agreement dated as of June 29, 2009 between
    Vuzix and the Agents. See Exhibit&#160;10.21 in the U.S.
    Prospectus.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In connection with the Offering, we will also enter into the
    Agency Agreement between the Company and the Agents referred to
    under &#147;Plan of Distribution&#148;.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Copies of these agreements are attached as exhibits to the U.S.
    Prospectus, are available on www.sedar.com and also may be
    examined during normal business hours at the offices of our
    Canadian legal counsel, Wildeboer Dellelce LLP, located at
    Wildeboer Dellelce Place, Suite&#160;800, 365 Bay Street,
    Toronto, Ontario, M5H 2V1, any time during the period of
    distribution of the Units under this prospectus.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    CDN-10
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Alternate page for Canadian Prospectus</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">
&nbsp;
</DIV><DIV style="margin-top: 0pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="margin-top: 21pt; font-size: 1pt">&nbsp;</DIV>
<A name='612'>
<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">ELIGIBILITY
    FOR INVESTMENT</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    In the opinion of Wildeboer Dellelce LLP, our Canadian counsel,
    and McCullough O&#146;Connor Irwin LLP, the Canadian counsel to
    the Agents, provided that the relevant provisions of the Tax Act
    and the regulations thereunder remain unamended at the time that
    the Shares are listed on a designated stock exchange for purpose
    of the Tax Act (which currently includes the
    <FONT style="white-space: nowrap">TSX-V),</FONT> the
    Shares, if and when listed on a designated stock exchange, and
    the Warrants, if and when the Shares are listed on a designated
    exchange, will be qualified investments under the Tax Act and
    the regulations thereunder for trusts governed by registered
    retirement savings plans, registered retirement income funds,
    deferred profit sharing plans, registered education savings
    plans, registered disability savings plans and tax-free savings
    accounts (each a &#147;Registered Plan&#148;), provided that, in
    the case of the Warrants, each person who is an annuitant, a
    beneficiary, an employer or a subscriber under the Registered
    Plan deals at arm&#146;s length (within the meaning of the Tax
    Act) with us. There can be no assurances that the Shares will be
    listed on a designated stock exchange.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    An investment in our Shares and Warrants will not generally be a
    &#147;prohibited investment&#148; for a particular trust
    governed by a tax-free savings account provided the holder does
    not have a &#147;significant interest&#148; in us. Generally, a
    holder will not have a significant interest in us unless the
    holder and/or persons not dealing at arm&#146;s length with the
    holder, owns directly or indirectly, 10% or more of the issued
    shares of any class of our capital stock or a corporation
    related to us. Specific rules may also deem an individual to own
    shares of a partnership in which he or she is a member or a
    trust of which he or she is a beneficiary.
</DIV>
<A name='613'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PURCHASERS&#146;
    STATUTORY RIGHTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Securities legislation in certain provinces of Canada provides
    purchasers with the right to withdraw from an agreement to
    purchase securities. This right may be exercised within two
    business days after receipt or deemed receipt of a prospectus
    and any amendment. In several of the provinces, the securities
    legislation further provides a purchaser with remedies for
    rescission or, in some jurisdictions, damages if the prospectus
    and any amendment contains a misrepresentation or is not
    delivered to the purchaser, provided that such remedies for
    rescission or damages are exercised by the purchaser within the
    time limit prescribed by the securities legislation of the
    purchaser&#146;s province or territory. The purchaser should
    refer to any applicable provisions of the securities legislation
    of the purchaser&#146;s province or territory for the
    particulars of these rights or consult with a legal advisor.
</DIV>
<A name='614'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">UNITED
    STATES PROSPECTUS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Attached is the U.S. Prospectus, which forms part of the
    <FONT style="white-space: nowrap">Form&#160;S-1</FONT>
    registration statement filed with the United States Securities
    and Exchange Commission in connection with the U.S. offering.
    The U.S.&#160;Prospectus is deemed to form a part of this
    prospectus.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    CDN-11
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Alternate page for Canadian Prospectus</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">
&nbsp;
</DIV><DIV style="margin-top: 0pt; font-size: 1pt">&nbsp;</DIV>
<A name='615'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CERTIFICATE
    OF VUZIX CORPORATION</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <FONT style="font-family: 'Times New Roman', Times">Dated&#160;June&#160;30,
    2009
    </FONT>
</DIV>

<DIV style="margin-top: 15pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    This prospectus constitutes full, true and plain disclosure of
    all material facts relating to the securities offered by this
    prospectus as required by the securities legislation of each of
    the provinces of Canada other than Qu&#233;bec.
</DIV>

<DIV style="margin-top: 42pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="50%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="48%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom">
<TD align="center" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    By: (Signed) <FONT style="font-variant: SMALL-CAPS">Paul J.
    Travers
    </FONT>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    By: (Signed) <FONT style="font-variant: SMALL-CAPS">Grant Russell
    </FONT>
</TD>
</TR>
<TR valign="bottom">
<TD align="center" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    President and Chief Executive Officer
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
     Chief Financial Officer, Treasurer and Secretary
</TD>
</TR>
<TR valign="bottom" style="line-height: 42pt">
<TD colspan="3">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" align="center" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    On behalf of the Board of Directors of Vuzix Corporation
</DIV>
</TD>
</TR>
<TR valign="bottom" style="line-height: 42pt">
<TD colspan="3">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" align="center" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    By: (Signed) <FONT style="font-variant: SMALL-CAPS">William Lee
    </FONT>
</DIV>
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" align="center" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Director
</DIV>
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    CDN-C-1
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="right" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>Alternate page for Canadian Prospectus</B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="margin-top: 6pt; font-size: 1pt">
&nbsp;
</DIV><DIV style="margin-top: 0pt; font-size: 1pt">&nbsp;</DIV>
<A name='616'>
<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">CERTIFICATE
    OF THE AGENTS</FONT></B>
</DIV>
</A>
<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <FONT style="font-family: 'Times New Roman', Times">Dated&#160;June&#160;30,
    2009
    </FONT>
</DIV>

<DIV style="margin-top: 15pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    To the best of our knowledge, information and belief, this
    prospectus constitutes full, true and plain disclosure of all
    material facts relating to the securities offered by this
    prospectus as required by the securities legislation of each of
    the provinces of Canada other than Qu&#233;bec.
</DIV>

<DIV style="margin-top: 42pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="50%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="48%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom">
<TD align="center" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <B>CANACCORD CAPITAL CORPORATION</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    <B>BOLDER INVESTMENT PARTNERS, LTD.</B>
</TD>
</TR>
<TR valign="bottom" style="line-height: 41pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="center" valign="top">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    By: (Signed) <FONT style="font-variant: SMALL-CAPS"> David Rentz
    </FONT>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    By: (Signed) <FONT style="font-variant: SMALL-CAPS">Paul
    Woodward
    </FONT>
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    CDN-C-2
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">PART&#160;II<BR>
    </FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">INFORMATION
    NOT REQUIRED IN PROSPECTUS</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;13.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Other
    Expenses of Issuance and Distribution.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following table sets forth all costs and expenses, other
    than underwriting discounts and commissions, payable by us in
    connection with the sale of the common stock being registered.
    All amounts shown are estimates except for the SEC registration
    fee, the FINRA filing fee, the Canadian securities regulators
    filing fees and the
    <FONT style="white-space: nowrap">TSX-V</FONT> filing
    fee.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="90%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=02 type=lead -->
    <TD width="6%" align="right">&nbsp;</TD>	<!-- colindex=02 type=body -->
    <TD width="1%" align="left">&nbsp;</TD>	<!-- colindex=02 type=hang1 -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom">
    <B>Amount to<BR>
    </B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD nowrap align="center" valign="bottom">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD colspan="2" nowrap align="center" valign="bottom" style="border-bottom: 1px solid #000000">
    <B>be Paid</B>
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR style="line-height: 3pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    SEC registration fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    1,699
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    FINRA filing fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    3,734
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Canadian securities regulators filing fees
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    <FONT style="white-space: nowrap">TSX-V</FONT> filing
    fee
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Blue sky qualification fees and expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Printing and engraving expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Legal fees and expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Accounting fees and expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Transfer agents and registrar fees and expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 10pt">
    Miscellaneous expenses
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="background: #CCEEFF">
<TD nowrap align="left" valign="bottom">
<DIV style="text-indent: -10pt; margin-left: 20pt">
    Total
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="left" valign="bottom">
    $
</TD>
<TD nowrap align="right" valign="bottom">
    *
</TD>
<TD nowrap align="left" valign="bottom">
&nbsp;
</TD>
</TR>
<TR valign="bottom" style="font-size: 1pt">
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD style="border-top: 3px double #000000">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV style="font-size: 1pt; margin-left: 0%; width: 13%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=60 -->

<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD valign="top">
    * </TD>
    <TD></TD>
    <TD valign="bottom">
    To be provided by amendment.</TD>
</TR>

</TABLE>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;14.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Indemnification
    of Directors and Officers.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We are incorporated under the laws of the State of Delaware.
    Section&#160;145 of the Delaware General Corporation Law
    provides that a Delaware corporation may indemnify any persons
    who are, or are threatened to be made, parties 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 such corporation), by
    reason of the fact that such person was an officer, director,
    employee or agents of such corporation, or is or was serving at
    the request of such person as an officer, director, employee or
    agents of another corporation or enterprise. The indemnity may
    include expenses (including attorneys&#146; fees), judgments,
    fines and amounts paid in settlement actually and reasonably
    incurred by such person in connection with such action, suit or
    proceeding, provided that such person acted in good faith and in
    a manner he or she reasonably believed to be in or not opposed
    to the corporation&#146;s best interests and, with respect to
    any criminal action or proceeding, had no reasonable cause to
    believe that his or her conduct was illegal. A Delaware
    corporation may indemnify any persons who are, or are threatened
    to be made, a party to any threatened, pending or completed
    action or suit by or in the right of the corporation by reason
    of the fact that such person was a director, officer, employee
    or agents of such corporation, or is or was serving at the
    request of such corporation as a director, officer, employee or
    agents of another corporation or enterprise. The indemnity may
    include expenses (including attorneys&#146; fees) actually and
    reasonably incurred by such person in connection with the
    defense or settlement of such action or suit, provided such
    person acted in good faith and in a manner he or she reasonably
    believed to be in or not opposed to the corporation&#146;s best
    interests except that no indemnification is permitted without
    judicial approval if the officer or director is adjudged to be
    liable to the corporation. Where an officer or director is
    successful on the merits or otherwise in the defense of any
    action referred to above, the corporation must indemnify him or
    her against the expenses which such officer or director has
    actually and reasonably incurred.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-1
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Section&#160;102(b)(7) of the Delaware General Corporation Law
    permits a corporation to provide in its certificate of
    incorporation that a director of the corporation shall not be
    personally liable to the corporation or its stockholders for
    monetary damages for breach of fiduciary duties as a director,
    except for liability for any:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="2%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    transaction from which the director derives an improper personal
    benefit;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    act or omission not in good faith or that involves intentional
    misconduct or a knowing violation of law;
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    unlawful payment of dividends or redemption of shares;&#160;or
</TD>
</TR>


<TR style="line-height: 6pt; font-size: 1pt"><TD>&nbsp;</TD></TR>


<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    &#149;&#160;
</TD>
    <TD align="left">
    breach of a director&#146;s duty of loyalty to the corporation
    or its stockholders.
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our certificate of incorporation provides that we shall
    indemnify each director and officer of the registrant, his
    heirs, executors and administrators, and may indemnify each
    employee and agents of the registrant, his heirs, executors,
    administrators and all other persons whom the registrant is
    authorized to indemnify under the provisions of the General
    Corporation Law of the State of Delaware, to the greatest extent
    permitted or provided by law (a)&#160;against all expenses
    (including attorney&#146;s fees), judgments, fines and amounts
    paid in settlement actually and reasonably incurred by him in
    connection with any action, suit or proceeding, whether civil,
    criminal, administrative or investigative, or in connection with
    any appeal therein, or otherwise, and (b)&#160;against all
    expenses (including attorney&#146;s fees) actually and
    reasonably incurred by him in connection with the defense or
    settlement of any action or suit by or in the right of the
    registrant, or in connection with any appeal therein, or
    otherwise; and no provision of Article&#160;9 of the
    registrant&#146;s certificate of incorporation is intended to be
    construed as limiting, prohibiting, denying or abrogating any of
    the general or specific powers or rights conferred by the
    General Corporation Law of the State of Delaware upon the
    registrant to furnish, or upon any court to award, such
    indemnification, or indemnification as otherwise authorized
    pursuant to the General Corporation Law of the State of Delaware
    or any other law now or hereafter in effect.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Our by-laws provide that all directors and officers of the
    registrant shall be entitled to be indemnified by us to the
    fullest extent permitted by the General Corporation Law of the
    State of Delaware. In addition, our by-laws provide that any
    person serving or having served at the request of the registrant
    as a director, trustee, officer, employee or agents of another
    corporation or of a partnership, joint venture, trust or other
    enterprise, including service with respect to an employee
    benefit plan, shall be entitled to be indemnified by us to the
    fullest extent permitted by the General Corporation Law of the
    State of Delaware.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Insofar as indemnification for liabilities arising under the
    Securities Act may be permitted to our directors, officers, and
    controlling persons pursuant to the foregoing provisions, or
    otherwise, we have been advised that in the opinion of the SEC
    such indemnification is against public policy as expressed in
    the Securities Act and is, therefore, unenforceable. In the
    event that a claim for indemnification against such liabilities
    (other than the payment of expenses incurred or paid by a
    director, officer or controlling person in a successful defense
    of any action, suit or proceeding) is asserted by such director,
    officer or controlling person in connection with the securities
    being registered, we will, unless in the opinion of its counsel
    the matter has been settled by controlling precedent, submit to
    the court of appropriate jurisdiction the question whether such
    indemnification by it is against public policy as expressed in
    the Securities Act and will be governed by the final
    adjudication of such issue.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Section&#160;174 of the Delaware General Corporation Law
    provides, among other things, that a director who willfully or
    negligently approves of an unlawful payment of dividends or an
    unlawful stock purchase or redemption may be held liable for
    such actions. A director who was either absent when the unlawful
    actions were approved, or dissented at the time, may avoid
    liability by causing his or her dissent to such actions to be
    entered in the books containing minutes of the meetings of the
    board of directors at the time such action occurred or
    immediately after such absent director receives notice of the
    unlawful acts.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    As permitted by the Delaware General Corporation Law, we have
    entered into indemnity agreements with each of our directors and
    executive officers that require us to indemnify such persons
    against any and all expenses (including attorneys&#146; fees),
    witness fees, damages, judgments, fines, settlements and other
    amounts incurred (including expenses of a derivative action) in
    connection with any action, suit or proceeding, whether actual
    or threatened, to which any such person may be made a party by
    reason of the fact that such person is or was a director, an
    officer or an employee of Vuzix or any of its affiliated
    enterprises, provided that such person acted in good faith
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-2
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    and in a manner such person reasonably believed to be in or not
    opposed to our best interests and, with respect to any criminal
    proceeding, had no reasonable cause to believe his or her
    conduct was unlawful. The indemnification agreements also set
    forth certain procedures that will apply in the event of a claim
    for indemnification thereunder.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    At present, there is no pending litigation or proceeding
    involving any of our directors or executive officers as to which
    indemnification is required or permitted, and we are not aware
    of any threatened litigation or proceeding that may result in a
    claim for indemnification.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We have an insurance policy covering our officers and directors
    with respect to certain liabilities, including liabilities
    arising under the Securities Act or otherwise.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Reference is made to the following documents filed as exhibits
    to this registration statement regarding relevant
    indemnification provisions described above and elsewhere herein:
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;15.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Recent
    Sales of Unregistered Securities.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The following list sets forth information regarding all
    securities sold or issued by us in the three years preceding the
    date of this registration statement.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;In May 2009, we granted options under our 2007 stock
    option plan to purchase an aggregate of 2,335,940&#160;shares of
    our common stock to 44&#160;employees. Each option is
    exercisable at $0.15 per share for ten years from the date of
    grant, subject to vesting over four years from the date of
    grant. The exercise price of these options is subject to upward
    adjustment to the initial public offering price per share of our
    common stock if the closing of this offering occurs within
    90&#160;days of the grant date.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;In January 2009, we issued 2,000,000&#160;shares of our
    common stock at a purchase price of $0.15, together with a
    warrant to purchase an additional 1,000,000&#160;shares of
    shares of our common stock at an exercise purchase price of
    $0.20 per share for 5&#160;years from the date of issue, to an
    individual investor for aggregate gross proceeds of $300,000 in
    cash.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (3)&#160;In December 2008, we issued warrants to purchase
    120,000&#160;shares of our common stock, exercisable at $0.01
    per share for five years from the date of issuance, to a
    consultant in consideration for services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (4)&#160;In December 2008, we issued warrants to purchase
    11,583&#160;shares of our common stock, exercisable at $0.15 per
    share for five years from the date of issuance, to a consultant
    in consideration for services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (5)&#160;In November 2008, we granted an option under our 2007
    stock option plan to purchase 142,864&#160;shares of our common
    stock to our external director as his annual retainer. The
    option is exercisable at $0.15 per share for ten years from the
    date of issuance and vests over 12&#160;months from the date of
    grant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (6)&#160;In November 2008, we granted options under our 2007
    stock option plan to purchase an aggregate of
    446,424&#160;shares of our common stock to one consultant and
    two employees. Each option is exercisable at $0.15 per share for
    ten years from the date of grant, subject to vesting over four
    years from the date of grant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (7)&#160;In September 2008, we issued 444,447&#160;shares of our
    common stock to a consultant in consideration for services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (8)&#160;In July and August 2008, we issued
    15,364,899&#160;shares of our common stock to 46 individual and
    institutional investors for aggregate gross proceeds of
    $2,304,735 in cash.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (9)&#160;In July 2008, we issued warrants to purchase
    66,667&#160;shares of our common stock, exercisable at
    $0.01&#160;per share for five years from the date of issuance,
    to a consultant in consideration for services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (10)&#160;In July 2008, we issued 482,640&#160;shares of our
    common stock to a consultant in consideration for services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (11)&#160;In July 2008, we granted options under our 2007 stock
    option plan to purchase an aggregate of 1,328,000&#160;shares of
    our common stock to seven employees. Each option is exercisable
    at $0.20 per share for ten years from the date of grant, subject
    to vesting over four years from the date of grant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (12)&#160;In June 2008, we issued 1,552,936&#160;shares of our
    common stock to 51 institutional and individual investors upon
    the exercise of warrants for aggregate gross proceeds of $15,529
    in cash.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-3
</DIV><!-- END PAGE WIDTH -->
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (13)&#160;In June 2008, we issued warrants to purchase
    157,504&#160;shares of our common stock, exercisable at
    $0.01&#160;per share for five years from the date of issuance,
    to a consultant in consideration for services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (14)&#160;In June 2008, we issued warrants to purchase
    24,945&#160;shares of our common stock, exercisable at
    $0.20&#160;per share for five years from the date of issuance,
    to a consultant in consideration for services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (15)&#160;In January 2008, we issued 2,450,888&#160;shares of
    our common stock upon the exercise of options granted under our
    2007 stock option plan for aggregate gross proceeds of $24,509
    in cash.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (16)&#160;In December 2007, we issued warrants to purchase
    45,000&#160;shares of our common stock exercisable at $0.01 per
    share and warrants to acquire 37,720&#160;shares of our common
    stock exercisable at $0.23336 per share to two consultants in
    consideration for services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (17)&#160;In November 2007, we granted options under our 2007
    stock option plan to purchase an aggregate of
    140,000&#160;shares of our common stock to an employee. Each
    option is exercisable at $0.20 per share for ten years from the
    date of grant, subject to vesting over four years from the date
    of grant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (18)&#160;In November 2007, we granted an option under our 2007
    stock option plan to purchase 142,864&#160;shares of our common
    stock to our non-employee director. The option is exercisable at
    $0.20 per share for ten years from the date of issuance and
    vests over 12&#160;months from the date of grant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (19)&#160;In November 2007, we issued 134,280&#160;shares of our
    common stock for aggregate gross proceeds of $1,343 in cash upon
    the exercise of the warrants issued in the transactions
    described in paragraph&#160;37 below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (20)&#160;In November 2007, we issued 500,000&#160;shares of our
    common stock upon the conversion of outstanding indebtedness at
    the rate of $0.20 per share.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (21)&#160;In October 2007, we issued warrants to acquire
    65,000&#160;shares of our common stock, exercisable at
    $0.20&#160;per share for two years from the date of issuance, to
    a consultant in consideration for services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (22)&#160;In September 2007, we granted options under our 2007
    stock option plan to purchase an aggregate of
    644,000&#160;shares of our common stock to six employees. Each
    option is exercisable at $0.20 per share for ten years from the
    date of grant, subject to vesting over four years from the date
    of grant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (23)&#160;In July 2007, we issued 42,856&#160;shares of our
    common stock to an individual investor for $429 in cash upon the
    exercise of warrants issued in the transaction described in
    paragraph 38 below.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (24)&#160;In June 2007, we issued warrants to acquire
    38,568&#160;shares of our common stock, exercisable at
    $0.0875&#160;per share for five years from the date of issuance,
    to a consultant in consideration for services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (25)&#160;In June 2007, we issued 20,891,600&#160;shares of our
    common stock to 160 individual and institutional investors for
    aggregate gross proceeds of $4,178,320 in cash.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (26)&#160;In June 2007, in consideration of their services as
    placement agents in the private placement described in the
    immediately preceding paragraph, we issued to Canaccord Capital
    Corporation 2,233,872&#160;shares of our common stock and to
    Canaccord Capital Corporation, IQ Ventures, Inc. and Lighthouse
    Financial Group, LLC warrants to purchase up to an aggregate of
    2,456,656&#160;shares of our common stock, exercisable at $1.60
    per share for two years from the date of issuance. The exercise
    price of the warrants has been reduced to $0.20 per share as a
    result of anti-dilution adjustments in accordance with the terms
    thereof.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (27)&#160;In June 2007, we issued warrants to acquire 17,144 and
    48,000&#160;shares of our common stock, exercisable at $0.00875
    per share for five years from the date of issuance, to two
    consultants in consideration for services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (28)&#160;In June 2007, we issued warrants to acquire
    168,320&#160;shares of our common stock, exercisable at $0.20
    per share for five years from the date of issuance, to a
    consultant in consideration for services.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (29)&#160;In May 2007, we issued 402,484&#160;shares of our
    common stock upon the exercise of options granted under our 2007
    stock option plan for aggregate gross proceeds of $3,539 in cash.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-4
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<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (30)&#160;In April 2007, we granted options under our 1997 stock
    option plan to purchase an aggregate of 274,286&#160;shares of
    our common stock to two employees. Each option is exercisable at
    $0.2334 per share for ten years from the date of grant, subject
    to vesting over four years from the date of grant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (31)&#160;In April 2007, we granted options under our 1997 stock
    option plan to purchase 571,432&#160;shares of our common stock
    to a consultant. The option is exercisable at $0.2334 per share
    for five years from the date of grant, subject to vesting over
    two years from the date of grant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (32)&#160;In December 2006, we granted options under our 1997
    stock option plan to purchase an aggregate of
    390,286&#160;shares of our common stock to 12&#160;employees.
    Each option is exercisable at $0.2334 per share for ten years
    from the date of grant, subject to vesting over four years from
    the date of grant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (33)&#160;In November 2006, we granted options under our 1997
    stock option plan to purchase an aggregate of
    571,429&#160;shares of our common stock to three employees. Each
    option is exercisable at $0.2334 per share for ten years from
    the date of grant, subject to vesting over four years from the
    date of grant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (34)&#160;In November 2006, we granted an option under our 1997
    stock option plan to purchase 142,864&#160;shares of our common
    stock to our external director as his annual retainer, The
    option is exercisable at $0.2334 per share for ten years from
    the date of issuance and vests over 12&#160;months from the date
    of grant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (35)&#160;In September 2006, we issued 22,857&#160;shares of our
    common stock upon the exercise of options granted under our 1997
    stock option plan for aggregate gross proceeds of $229 in cash.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (36)&#160;In September 2006, in consideration of a loan of
    $500,000, we issued to the lender a warrant exercisable upon
    conversion of the promissory note issued in evidence of the loan
    to purchase up to that number of shares of our common stock
    equal to the principal amount of and accrued interest on the
    promissory note then converted divided by 0.5334, exercisable at
    $0.35 per share for three years from the date of the issue of
    the promissory note. As of the date of this prospectus, the
    promissory note has not been converted. Interest on the
    promissory note accrued at an initial annual rate of 10% but
    increased to 18% as of February&#160;1, 2009.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (37)&#160;In September 2006, we issued 10,000&#160;shares of our
    Series&#160;C Preferred Stock and a warrant to purchase
    91,432&#160;shares of our common stock, exercisable at $0.00875
    per share for approximately three years from the date of
    issuance, to one individual investor for aggregate gross
    proceeds of $100,000 in cash.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (38)&#160;In September 2006, in consideration of loans in the
    aggregate amount of $200,000, we issued to the lenders warrants
    to purchase up to 85,712&#160;shares of our common stock,
    exercisable at $0.00875 per share for five years from the date
    of issuance.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (39)&#160;In August 2006, we granted an employee an option under
    our 1997 stock option plan to purchase 142,857&#160;shares of
    our common stock, exercisable at $0.2275 per share for ten years
    from the date of grant, subject to vesting over four years from
    the date of grant.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The offers, sales and issuances of the securities described in
    paragraphs&#160;1, 5, 6, 17, 18, 22 and 30 through 34 above were
    deemed to be exempt from registration under the Securities Act
    in reliance on Rule&#160;701 because the transactions were under
    compensatory benefit plans and contracts relating to
    compensation as provided under Rule&#160;701. The recipients of
    such securities were our employees, directors or bona fide
    consultants and received the securities under our stock option
    plan. Appropriate legends were affixed to the securities issued
    in these transactions. Each of the recipients of securities in
    these transactions had adequate access, through employment,
    business or other relationships, to information about us.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The offers, sales and issuances of the securities described all
    the other paragraphs above were deemed to be exempt from
    registration under the Securities Act in reliance on
    Rule&#160;506 of Regulation&#160;D because the issuance of
    securities to the accredited investors did not involve a public
    offering. The recipients of securities in each of these
    transactions acquired the securities for investment only and not
    with a view to or for sale in connection with any distribution
    thereof and appropriate legends were affixed to the securities
    issued in these transactions. Each of the recipients of
    securities in these transactions was an accredited investor
    under Rule&#160;501 of Regulation&#160;D.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-5
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF"><!-- TABLE 05 -->

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;16.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Exhibits
    and Financial Statement Schedules.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF"><!-- TABLE 05 -->

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">(a)&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Exhibits.</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    A list of exhibits filed with this registration statement on
    <FONT style="white-space: nowrap">Form&#160;S-1</FONT>
    is set forth in the Exhibit&#160;Index and is incorporated in
    this Item&#160;16(a) by reference.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF"><!-- TABLE 05 -->

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">(b)&#160;&#160;</FONT></B>
</TD>
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Financial
    Statement Schedules.</FONT></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    No financial statement schedules are provided because the
    information called for is not required or is shown either in the
    financial statements or the notes thereto.
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF"><!-- TABLE 05 -->

<TR>
    <TD width="9%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>
    <B><FONT style="font-family: 'Times New Roman', Times">Item&#160;17.<I>&#160;&#160;</I></FONT></B>
</TD>
    <TD>
    <B><I><FONT style="font-family: 'Times New Roman', Times">Undertakings.</FONT></I></B>
</TD>
</TR>

</TABLE>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The undersigned registrant hereby undertakes to provide to the
    agents at the closing specified in the underwriting agreement
    certificates in such denominations and registered in such names
    as required by the agents to permit prompt delivery to each
    purchaser.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Insofar as indemnification for liabilities arising under the
    Securities Act 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 SEC such indemnification is against public
    policy as expressed in the Securities 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 in the
    opinion of its counsel the matter has been settled by
    controlling precedent, submit to a court of appropriate
    jurisdiction the question whether such indemnification by it is
    against public policy as expressed in the Securities Act and
    will be governed by the final adjudication of such issue.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    The undersigned registrant hereby undertakes that:
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (1)&#160;For purposes of determining any liability under the
    Securities Act, the information omitted from the form of
    prospectus filed as part of this registration statement in
    reliance upon Rule&#160;430A and contained in a form of
    prospectus filed by the registrant pursuant to Rule 424(b)(1) or
    (4)&#160;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.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 4%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    (2)&#160;For the purpose of determining any liability under the
    Securities Act, 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.
</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-6
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">SIGNATURES</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to the requirements of the Securities Act of 1933, as
    amended, the registrant has duly caused this Registration
    Statement on
    <FONT style="white-space: nowrap">Form&#160;S-1</FONT>
    to be signed on its behalf by the undersigned, thereunto duly
    authorized, in the City of Rochester, State of New York, on the
    30th&#160;day of June, 2009.
</DIV>

<DIV style="margin-top: 24pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 49%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <B>VUZIX CORPORATION</B>
</DIV>

<DIV style="margin-top: 48pt; font-size: 1pt">&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="49%"></TD>
    <TD width="4%"></TD>
    <TD width="47%"></TD>
</TR>

<TR valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <TD>&nbsp;</TD>
    <TD>    By:&#160;
</TD>
    <TD align="left">
    <DIV style="display:inline; text-align:left;">/s/&#160;&#160;Paul
    J. Travers</DIV>
</TD>
</TR>

</TABLE>

<DIV style="font-size: 2pt; margin-left: 53%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=999 iwidth=456 length=0 -->

<DIV align="left" style="margin-left: 53%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Paul J. Travers
</DIV>

<DIV align="left" style="margin-left: 53%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <I>President and Chief Executive Officer</I>
</DIV>

<DIV style="margin-top: 18pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">POWER OF
    ATTORNEY</FONT></B>
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    We, the undersigned directors and officers of Vuzix Corporation,
    do hereby constitute and appoint Paul J. Travers and Grant
    Russell, or either of them, our true and lawful attorneys and
    agents, to do any and all acts and things in our name and on our
    behalf in our capacities as directors and officers and to
    execute any and all instruments for us and in our names in the
    capacities indicated below, which said attorneys and agents, or
    either of them, may deem necessary or advisable to enable said
    registrant to comply with the Securities Act of 1933 and any
    rules, regulations and requirements of the Securities and
    Exchange Commission, in connection with this registration
    statement, including specifically, but without limitation, power
    and authority to sign for us or any of us in our names in the
    capacities indicated below, any and all amendments (including
    post-effective amendments and any related registration statement
    pursuant to Rule&#160;462(b) under the Securities Act of
    1933)&#160;hereto and we do hereby ratify and confirm all that
    said attorneys and agents, or any of them, shall do or cause to
    be done by virtue hereof.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    Pursuant to the requirements of the Securities Act of 1933, as
    amended, this Registration Statement on
    <FONT style="white-space: nowrap">Form&#160;S-1</FONT>
    has been signed by the following persons in the capacities and
    on the dates indicated.
</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="3%">&nbsp;</TD>	<!-- colindex=01 type=maindata -->
    <TD width="1%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="39%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=03 type=gutter -->
    <TD width="39%">&nbsp;</TD>	<!-- colindex=03 type=maindata -->
    <TD width="3%">&nbsp;</TD>	<!-- colindex=04 type=gutter -->
    <TD width="12%">&nbsp;</TD>	<!-- colindex=04 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR style="font-size: 8pt" valign="bottom" align="center">
<TD colspan="3" nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Signature</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Title</B>
</DIV>
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="bottom">
<DIV style="border-bottom: 1px solid #000000; width: 1%; padding-bottom: 1px">
    <B>Date</B>
</DIV>
</TD>
</TR>
<TR style="line-height: 12pt; font-size: 1pt">
<TD>&nbsp;
</TD>
</TR>
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" align="center" valign="top">
    <DIV style="display:inline; text-align:center; width:90%">/s/&#160;&#160;Paul
    J. Travers</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=201 iwidth=192 length=0 -->Paul
    J. Travers
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    President, Chief Executive Officer<BR>
    and Director <BR>
    <I>(Principal Executive Officer)</I>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    June 30, 2009
</TD>
</TR>
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" align="center" valign="top">
    <DIV style="display:inline; text-align:center; width:90%">/s/&#160;&#160;Grant
    Russell</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=201 iwidth=192 length=0 -->Grant
    Russell
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    Chief Financial Officer, Secretary<BR>
    and Treasurer <BR>
    <I>(Principal Financial and Accounting Officer)</I>
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    June 30, 2009
</TD>
</TR>
<TR valign="bottom" style="line-height: 12pt">
<TD colspan="3">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
</TR>
<TR valign="bottom">
<TD colspan="3" align="center" valign="top">
    <DIV style="display:inline; text-align:center; width:90%">/s/&#160;&#160;William
    Lee</DIV><BR>
    <DIV style="font-size: 2pt; margin-left: 0%; width: 100%;  align: left; border-bottom: 1pt solid #000000"></DIV><!-- callerid=201 iwidth=192 length=0 -->William
    Lee
</TD>
<TD>
&nbsp;
</TD>
<TD nowrap align="center" valign="top">
    Director
</TD>
<TD>
&nbsp;
</TD>
<TD align="center" valign="top">
    June 30, 2009
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<P align="center" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
    <BR>
    II-7
</DIV><!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="width: 87%; margin-left: 6%"><!-- BEGIN PAGE WIDTH -->

<DIV align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: #FFFFFF">

    <B><FONT style="font-family: 'Times New Roman', Times">Index to
    Exhibits</FONT></B>
</DIV>

<DIV style="margin-top: 12pt; font-size: 1pt">&nbsp;</DIV>

<TABLE border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">
<!-- Table Width Row BEGIN -->
<TR style="font-size: 1pt" valign="bottom">
    <TD width="3%" align="right">&nbsp;</TD>	<!-- colindex=01 type=lead -->
    <TD width="1%" align="right">&nbsp;</TD>	<!-- colindex=01 type=body -->
    <TD width="3%" align="left">&nbsp;</TD>	<!-- colindex=01 type=align1 -->
    <TD width="2%">&nbsp;</TD>	<!-- colindex=02 type=gutter -->
    <TD width="91%">&nbsp;</TD>	<!-- colindex=02 type=maindata -->
</TR>
<!-- Table Width Row END -->
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    1
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Agency Agreement
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Certificate of Incorporation currently in effect
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .2*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Amended and Restated Certificate of Incorporation to be
    effective immediately following the closing of the offering
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .3
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Bylaws currently in effect
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    3
</TD>
<TD nowrap align="left" valign="top">
    .4*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Amended and Restated Bylaws to be effective immediately
    following the closing of the offering
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Specimen certificate evidencing shares of common stock
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .2*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Specimen common stock purchase warrant
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    4
</TD>
<TD nowrap align="left" valign="top">
    .3*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Warrant Indenture between the registrant and
    Computershare Trust&#160;Company of Canada
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="left" valign="top">
&nbsp;
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Certain instruments defining the rights of the holders of
    long-term debt of the registrant, none of which authorize a
    total amount of indebtedness in excess of 10% of the total
    assets of the registrant and its subsidiary on a consolidated
    basis, have not been filed as exhibits. The registrant hereby
    agrees to furnish a copy of any of these agreements to the
    Commission upon request.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    5
</TD>
<TD nowrap align="left" valign="top">
    .1*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Opinion of Boylan, Brown, Code, Vigdor&#160;&#038; Wilson, LLP
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .1+
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    2007 Amended and Restated Stock Option Plan
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .2+
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    2009 Stock Plan
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .3+*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Award Agreement under 2009 Stock Plan
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .4+
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    2009 Non-Employee Directors&#146; Stock Option Plan
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .5+*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Option Grant Agreement under 2009 Non-Employee
    Directors&#146; Stock Option Plan
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .6+
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of Indemnification Agreement by and between the registrant
    and each director and executive officer
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .7+
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement dated as of August&#160;1, 2007 by and
    between the registrant and Paul J. Travers
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .8+
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Employment Agreement dated as of August&#160;1, 2007 by and
    between the registrant and Grant Russell
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .9
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Shareholders Agreement dated as of October&#160;11, 2000 by and
    among the registrant and Shareholders (as defined therein)
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .10
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Registration Rights Agreement dated as of October&#160;11, 2000
    by and among the registrant and the Investors (as defined
    therein)
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .11
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Registration Rights Agreement dated as of June 2005 by and among
    the registrant and the Investors (as defined therein)
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .12*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Technology Purchase and Royalty Agreement dated as of
    December&#160;23, 2005 between the registrant and New Light
    Industries, Ltd.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .13
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Warrant to purchase common stock dated as of December&#160;23,
    2005 issued by the registrant to New Light Industries, Ltd.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .14
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Rights Agreement dated as of December&#160;23, 2005 by and
    between the registrant and New Light Industries, Ltd.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .15
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Agency Agreement dated as of June&#160;29, 2007 by and between
    the registrant and Canaccord Capital Corporation
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .16
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Form of warrant to purchase common stock issued by the
    registrant pursuant to the Agency Agreement dated as of
    June&#160;29, 2007 by and between the registrant and Canaccord
    Capital Corporation
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .17
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Demand Note in the original principal amount of $247,690.92 by
    the registrant to the order of Paul J. Travers
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .18
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Loan Agreement dated as of October 2008 by and between the
    registrant and Paul J. Travers
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .19*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Promissory Note dated as of October 2008 by the registrant to
    the order of Paul J. Travers
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    10
</TD>
<TD nowrap align="left" valign="top">
    .20
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Fiscal Advisory Fee Agreement dated as of June&#160;29, 2009 by
    and between the registrant and Canaccord Capital Corporation and
    Bolder Investment Partners, Ltd.
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Consent of Rotenberg&#160;&#038; Co. LLP, independent registered
    public accounting firm
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .2
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Consent of Davie Kaplan, CPA ,&#160;P.C., independent registered
    public accounting firm
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    23
</TD>
<TD nowrap align="left" valign="top">
    .3*
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Consent of Boylan, Brown, Code, Vigdor&#160;&#038; Wilson, LLP
    (included in Exhibit&#160;5.1)
</TD>
</TR>
<TR valign="bottom">
<TD nowrap align="right" valign="top">
&nbsp;
</TD>
<TD nowrap align="right" valign="top">
    24
</TD>
<TD nowrap align="left" valign="top">
    .1
</TD>
<TD>
&nbsp;
</TD>
<TD align="left" valign="top">
    Power of Attorney (included on signature page)
</TD>
</TR>
</TABLE>

<DIV align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV>

<DIV style="margin-top: 6pt; font-size: 1pt">&nbsp;</DIV>

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<DIV style="margin-top: 3pt; font-size: 1pt">&nbsp;</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

<TR>
    <TD width="1%"></TD>
    <TD width="1%"></TD>
    <TD width="98%"></TD>
</TR>

<TR>
    <TD valign="top">
    * </TD>
    <TD></TD>
    <TD valign="bottom">
    To be filed by amendment</TD>
</TR>


<TR style="line-height: 3pt; font-size: 1pt"><TD>&nbsp;</TD></TR>

<TR>
    <TD valign="top">
    + </TD>
    <TD></TD>
    <TD valign="bottom">
    Management contract or compensation plan or arrangement</TD>
</TR>

</TABLE>

<P align="left" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: #FFFFFF">

</DIV><!-- END PAGE WIDTH -->
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{"company-data": {"conformed-name": "Vuzix Corp", "cik": "0001463972", "irs-number": "043392453", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-160417", "film-number": "09925486"}, "business-address": {"street1": "75 TOWN CENTRE DRIVE", "city": "ROCHESTER", "state": "NY", "zip": "14623", "phone": "585-359-5900"}, "mail-address": {"street1": "75 TOWN CENTRE DRIVE", "city": "ROCHESTER", "state": "NY", "zip": "14623"}}
S-1
Table of Contents
As filed with the Securities and Exchange Commission on
    July 2, 2009
Registration
No. 333-
UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
Washington, D.C.
    20549
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VUZIX CORPORATION
(Exact name of registrant as
    specified in its charter)
Delaware
3577
04-3392453
(State or other jurisdiction
    of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
75 Town Centre Drive
Rochester, NY 14623
(585) 359-5900
(Address, including
    zip code, and telephone number, including area code, of
    registrant's principal executive offices)
Copies to:
Robert F. Mechur, Esq.
Boylan, Brown, Code, Vigdor & Wilson, LLP
2400 Chase Square
Rochester, New York 14604
(585) 232-5300
Kenneth G. Sam, Esq.
Jason Brenkert, Esq.
Dorsey & Whitney LLP
370 17th Street, Suite 470
Denver, Colorado  80202
(303) 629-3400
Approximate date of commencement of proposed sale to the
    public:
As soon as practicable after the
    effective date of this registration statement.
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, check the following
    box.
þ
If this form is filed to register additional securities for an
    offering pursuant to Rule 462(b) under the Securities Act,
    check the following box and list the Securities Act registration
    statement number of the earlier effective registration statement
    for the same
    offering.
o
If this form is a post-effective amendment filed pursuant to
    Rule 462(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 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
o
Smaller reporting company
þ
(Do not check if a smaller reporting company)
Proposed Maximum
Amount of
Aggregate
Registration
Title of Securities to be Registered
Offering Price(1)
Fee
Units, each consisting of one share of Common Stock,
    $0.001 par value, and one-half of one Common Stock Purchase
    Warrant(2)
$
15,464,625.00
$
862.93
Shares of Common Stock included as part of the Units
Common Stock Purchase Warrants included as part of the Units
Shares of Common Stock underlying the Common Stock Purchase
    Warrant included in the Units
$
11,598,469.00
(3)(5)
$
647.19
Agent Compensation Options(4)
Shares of Common Stock included as part of the Agent
    Compensation Options
$
1,933,079.00
$
107.87
Common Stock Purchase Warrants included as part of the
    Compensation Options(5)
Shares of Common Stock underlying the Common Stock Purchase
    Warrants included in the Compensation Options
$
1,449,808.00
(3)(5)
$
80.90
Total
$
30,445,981.00
$
1698.89
(1)
Estimated solely for purposes of
    calculating the registration fee in accordance with Rule 457(o)
    under the Securities Act of 1933, as amended. In accordance with
    Rule 457(o) under the Securities Act, the number of shares
    being registered and the maximum offering price per share are
    not included in this table.
(2)
Public offering of units, each unit
    consisting of one share of common stock, $0.001 par value,
    and one-half of one common stock purchase warrant.
(3)
Estimated pursuant to
    Rule 457(g).
(4)
The Canadian agents will receive
    options entitling the agents to purchase that number of shares
    of common stock and warrants equal to 12.5% of the aggregate
    number of shares of common stock and warrants sold under the
    offering, respectively (including the shares of common stock and
    warrants issued upon exercise of the over-allotment option), at
    the offering price per share and warrant, respectively, for a
    period of 12 months from the closing date.
(5)
Pursuant to Rule 416, there
    are also being registered such indeterminable additional
    securities as may be issued as a result of any additional shares
    of common stock that shall become issuable by reason of any
    stock dividend, stock split, recapitalization or other similar
    transaction effected without the receipt of consideration that
    results in an increase in the number of the outstanding shares
    of common stock.
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 that
    specifically states that this Registration Statement shall
    thereafter become effective in accordance with Section 8(a)
    of the Securities Act of 1933, as amended, or until the
    Registration Statement shall become effective on such date as
    the Commission, acting pursuant to said Section 8(a), may
    determine.
Table of Contents
EXPLANATORY
    NOTE
This Registration Statement contains a prospectus relating to an
    offering of shares of our common stock, warrants and common
    stock acquirable upon exercise of warrants in the United States,
    together with separate prospectus pages relating to an offering
    of shares of our common stock, warrants and common stock
    acquirable upon exercise of warrants in Canada. The
    U.S. prospectus and the Canadian prospectus will be
    identical in all material respects. The complete
    U.S. prospectus is included herein and is followed by those
    pages to be used solely in the Canadian prospectus. Each of the
    alternate pages for the Canadian prospectus included in this
    registration statement has been labeled "Alternate Page for
    Canadian Prospectus."
Table of Contents
The
information in this 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 prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
(Subject
    to Completion) Dated June 30, 2009
PRELIMINARY PROSPECTUS
Vuzix
    Corporation
Up to • 
    Units
(each consisting of one share of
    common stock and one half of one common stock purchase
    warrant)
This is the initial public offering of our securities in the
    United States and Canada. We are offering for sale up
    to • units at a price per unit of
    Cdn$ • . Each unit consists of one share of our
    common stock, par value US$0.001 per share, and one half of one
    common stock purchase warrant. Each whole warrant entitles its
    holder to purchase one share of our common stock at a price of
    Cdn$ •  per share at any time
    for • months after the closing date of the
    offering. Our units are being offered to the public in each
    province of Canada other than Quebec by our Canadian agents,
    Canaccord Capital Corporation and Bolder Investment Partners,
    Ltd., under the terms of a prospectus filed with the securities
    authorities in each Canadian province other than Quebec and
    concurrently in the United States through selling agents,
    including Canaccord Adams Inc., a US registered broker dealer
    affiliated with Canaccord Capital Corporation, and such other US
    registered dealers as may be designated by our Canadian agents.
    Prior to this offering, there has been no public market for our
    securities.
There is currently no market through which our
    securities may be sold, and purchasers may not be able to resell
    the securities purchased under this prospectus.
We have
    applied for the listing of our common stock on the TSX Venture
    Exchange (TSX-V) under the symbol
    "          ".
    Listing of our common stock will be subject to fulfilling all of
    the requirements of the TSX-V. We do not intend to list the
    warrants on any securities exchange.
Our business and an investment in our securities involve
    significant risks. These risks are described under the caption
    "Risk Factors" beginning on page 7 of this
    prospectus.
Neither the Securities and Exchange Commission nor any other
    securities commission or regulatory authority has approved or
    disapproved of these securities or has passed upon the accuracy
    or adequacy of this prospectus. Any representation to the
    contrary is a criminal offense.
Per Unit(2)
Total
Public offering price(1)
Cdn$
Cdn$
Underwriting discounts and commissions(3)(4)
Cdn$
Cdn$
Proceeds, before expenses, to Vuzix
Cdn$
Cdn$
(1)
The offering is denominated in
    Canadian dollars.
(2)
We intend to allocate
    Cdn$      to the share of common stock
    and Cdn$      to the one half of one
    common stock purchase warrant comprising each unit.
(3)
We have retained the Canadian
    agents to solicit subscriptions for the units on a best efforts
    basis. As consideration for their services in connection with
    the initial public offering, the Canadian agents will receive:
    (i) a commission, payable in cash, equal to 8% of the gross
    proceeds of the offering; (ii) options entitling the agents
    to purchase that number of shares of our common stock and
    warrants equal to 12.5% of the aggregate number of shares of our
    common stock and warrants sold under the offering (including the
    shares and warrants issued upon exercise of the over-allotment
    option), at the offering price per share and warrant, for a
    period of 12 months from the closing date; and (iii) a
    non-refundable due diligence fee of Cdn$15,000. The Canadian
    agents will also be reimbursed for their reasonable fees and
    expenses including the reasonable legal fees and disbursements
    of legal counsel to the agents. The Canadian agents may appoint
    selling agents in the United States, which may be paid cash
    selling commissions not to exceed 6% of the gross proceeds of
    the offering in the United States and options entitling US
    selling agents to purchase that number of shares of our common
    stock and warrants equal to 8% of the aggregate number of shares
    of our common stock and warrants sold in the United States under
    the offering (including the shares and warrants issued upon
    exercise of the over-allotment option) at the initial public
    offering price for a period of 12 months from the closing
    date. The commission paid to US selling agents will be paid by
    the Canadian agents from their commissions. Canaccord Adams
    Inc., a US registered broker dealer affiliated with Canaccord
    Capital Corporation, has been appointed as a selling agent.
(4)
In consideration of certain fiscal
    advisory services rendered by the Canadian agents to us pursuant
    to a fiscal advisory fee agreement between us and the Canadian
    agents, we have agreed to issue to the Canadian agents at the
    closing of this offering, in payment of a fiscal advisory fee,
    that number of shares of our common stock equal to, depending on
    the gross proceeds of the offering, between 1.0% and 2.0% of our
    common stock issued and outstanding immediately upon the closing
    of the offering. The issuance of these shares to the Canadian
    agents is not covered by this prospectus. These shares will be
    issued pursuant to exemptions from the registration requirements
    of applicable United States and Canadian securities laws and
    will be subject to resale restrictions under those laws and a
    lock-up agreement for one year. See
    "Underwriting — Fiscal Advisory Fee
    Agreement."
We have granted the agents an over-allotment option, exercisable
    for a period of 30 days from the date of the closing of
    this offering, to sell additional shares of common stock and
    whole warrants up to the lesser of the agents'
    over-allocation position determined as of the time of closing of
    the offering and • shares of common stock
    and • whole warrants (15% of the number of shares
    and whole warrants offered by us under this prospectus) or any
    combination thereof at a price of Cdn$ •  per
    share and Cdn$ •  per warrant to cover
    over-allotments, if any, and for market stabilization purposes.
    For greater clarity, these warrants will only be issued for the
    purpose of distribution of units to purchasers. The aggregate
    number of shares and whole warrants issuable to purchasers
    pursuant to the offering will not
    exceed • and • , respectively. If
    the over-allotment option is exercised in full, the total price
    to the public will be Cdn$ • , the underwriting
    discounts and commissions payable to the agents will be
    Cdn$ •  and the net proceeds to Vuzix will be
    Cdn$ • . The expenses associated with any
    exercise of the over-allotment option, together with the
    agents' commission, will be paid by us. See
    "Underwriting."
The agents expect to deliver the shares of common stock and
    warrants comprising the units in Toronto, Ontario, Canada on or
    about          ,
    2009.
CANACCORD ADAMS INC.
The date of this prospectus
    is          ,
    2009.
Table of Contents
Table of Contents
Table of Contents
TABLE OF
    CONTENTS
Page
General Matters
ii
Use of Market and Industry Data
ii
Prospectus Summary
1
Risk Factors
7
Forward-Looking Statements
24
Use of Proceeds
25
Dividend Policy
26
Capitalization
27
Dilution
29
Selected Financial and other Data
32
Management's Discussion and Analysis of
    Financial Condition and Results of Operations
34
Business
43
Management
57
Executive Compensation
61
Related Party Transactions
73
Corporate Governance
74
Security Ownership of Certain Beneficial Owners
    and Management
77
Description of Capital Stock
78
Shares Eligible for Future Sale
84
Underwriting
87
Legal Matters
90
Experts
90
Where You Can Find Additional Information
90
Index to Consolidated Financial Statements
F-1
EX-3.1
EX-3.3
EX-10.1
EX-10.2
EX-10.4
EX-10.6
EX-10.7
EX-10.8
EX-10.9
EX-10.10
EX-10.11
EX-10.13
EX-10.14
EX-10.15
EX-10.16
EX-10.17
EX-10.18
EX-10.20
EX-23.1
EX-23.2
Table of Contents
You should rely only on the information contained in this
    prospectus. We have not, and the agents have not, authorized any
    other person to provide you with different information. If
    anyone provides you with different or inconsistent information,
    you should not rely on it. We are not, and the agents are not,
    making an offer to sell these securities in any jurisdiction
    where the offer or sale is not permitted. You should assume that
    the information appearing in this prospectus is accurate only as
    of the date on the front cover of this prospectus. Our business,
    financial condition, results of operations and prospects may
    have changed since that date.
GENERAL
    MATTERS
All references to Vuzix, the "company,"
    "we," "us" and "our" are
    references to Vuzix Corporation.
Unless otherwise indicated, all references to
    "dollars," "US$," or "$" in this
    prospectus are to United States dollars and all references to
    "Cdn$" are to Canadian dollars. Unless otherwise
    indicated, all Canadian dollar values have been translated to US
    dollars, or vice versa, using a convenience translation of
    US$1.00 = Cdn$ • . On June 29, 2009, the
    noon buying rate of the Bank of Canada was US$1.00 = Cdn$1.1583.
This prospectus contains various company names, product names,
    trade names, trademarks and service marks, all of which are the
    properties of their respective owners.
Unless otherwise indicated or the context otherwise requires,
    all information in this prospectus assumes no exercise of the
    over-allotment option.
Unless otherwise indicated, all references to "GAAP"
    in this prospectus are to United States generally accepted
    accounting principles.
We completed a
1-for-7
reverse stock split of our common stock in June 2007 and an
8-for-1
split of our common stock in July 2008. All share numbers and
    amounts per share in this prospectus have been retroactively
    adjusted to give effect to these changes.
Information contained on our websites, including
www.vuzix.com
, shall not be deemed to be part of this
    prospectus or incorporated herein by reference and should not be
    relied upon by prospective investors for the purposes of
    determining whether to purchase the units offered hereunder.
Through and
    including          ,
    2009 (the 40th day after the date of this prospectus), all
    dealers effecting transactions in units or shares of our common
    stock, whether or not participating in this offering, may be
    required to deliver a prospectus. This is in addition to a
    dealer's obligation to deliver a prospectus when acting as
    an underwriter with respect to an unsold allotment or
    subscription.
For investors outside the United States, neither we nor any of
    our agents have done anything that would permit this offering or
    possession or distribution of this prospectus in any
    jurisdiction where action for that purpose is required, other
    than in the United States and certain provinces of Canada. You
    are required to inform yourself about and to observe any
    restrictions relating to this offering and the distribution of
    this prospectus.
USE OF
    MARKET AND INDUSTRY DATA
This prospectus includes market and industry data that has been
    obtained from third party sources, including industry
    publications, as well as industry data prepared by our
    management on the basis of its knowledge of and experience in
    the industries in which we operate (including our
    management's estimates and assumptions relating to those
    industries based on that knowledge). Management's knowledge
    of such industries has been developed through its experience and
    participation in those industries. Although our management
    believes such information to be reliable, neither we nor our
    management have independently verified any of the data from
    third party sources referred to in this prospectus or
    ascertained the underlying economic assumptions relied upon by
    such sources. In addition, the agents have not independently
    verified any of the industry data prepared by management or
    ascertained the underlying estimates and assumptions relied upon
    by management. Furthermore, references in this prospectus to any
    publications, reports, surveys or articles prepared by third
    parties should not be construed as depicting the complete
    findings of the entire publication, report, survey or article.
    The information in any such publication, report survey or
    article is not incorporated by reference in this prospectus.
ii
Table of Contents
PROSPECTUS
    SUMMARY
This summary provides an overview of selected information
    contained elsewhere in this prospectus and does not contain all
    of the information you should consider before investing in our
    securities. You should carefully read the prospectus and the
    registration statement of which this prospectus is a part in
    their entirety before investing in our securities, including the
    information discussed under "Risk Factors" beginning
    on page 7 and our financial statements and notes thereto
    that appear elsewhere in this prospectus.
BUSINESS
Company
    Overview
We are engaged in the design, manufacture, marketing and sale of
    devices that are worn like eyeglasses and feature built-in video
    screens that enable the user to view video and digital content,
    such as movies, computer data, the Internet or video games. Our
    products (known commercially as Video Eyewear, but also commonly
    referred to as virtual displays, wearable displays, personal
    viewers, personal displays, head mounted displays, or
near-to-eye
displays) are used to view high-resolution video and digital
    information primarily from mobile devices (such as cell phones,
    portable media players, gaming systems and laptop computers) and
    from personal computers. Our products provide the user with a
    virtual viewing experience that simulates viewing a large screen
    television or desktop computer monitor practically anywhere,
    anytime.
Our Video Eyewear products feature high performance miniature
    display modules, low power electronics and related optical
    systems. We produce both monocular and binocular Video Eyewear
    devices that we believe are excellent solutions for many mobile
    computer, mobile internet devices (MID) or video viewing
    requirements, including general entertainment applications. We
    focus on two markets: the consumer markets for gaming, mobile
    video viewing and stereoscopic three-dimensional video viewing;
    and rugged mobile displays for defense and industrial
    applications. We also offer low-vision assist Video Eyewear
    products that are designed to assist and improve the remaining
    vision of people suffering from macular degeneration.
The development of intellectual property rights relating to our
    technologies is a key aspect of our business strategy. We have
    generated and continue to generate intellectual property as a
    result of our ongoing performance of development contracts and
    our internal research and development activities. We have also
    acquired technologies developed by third parties and we may do
    so in the future.
Industry
    Overview
Many mobile devices now allow the user to view high-resolution
    full color content. We believe that typical displays currently
    used on mobile devices do not work well for this purpose because
    they are either too small, making it extremely difficult to view
    the detail in their display images with a human eye, or too
    large, making the mobile device cumbersome and difficult to use
    and carry. Some mobile devices employ a touch screen with
    software to magnify or zoom in on a partial image. We believe
    that many consumers consider this solution unsatisfactory
    because it is difficult to navigate and find information on the
    portion of the page being viewed.
In contrast, our Video Eyewear products enable the user to
    effectively view the entire screen on a small, eyeglass-like
    device. Our products employ microdisplays that provide full
    screen resolution but are smaller than one-inch diagonally, with
    some as small as one-quarter of an inch. To make images on the
    microdisplays viewable, our Video Eyewear products incorporate
    proprietary magnifying optics that are usually designed by us.
    The result is a detailed virtual image that appears to the
    viewer to be similar to the image on a full size computer screen
    from a normal desktop working distance or the image on a large
    flat panel television from normal home TV viewing distance. For
    example, when magnified through our optics, a high-resolution
    0.44-inch diagonal microdisplay can provide a viewing experience
    comparable to that on a
62-inch
diagonal television screen viewed at nine feet. We refer to this
    as a
62-inch
virtual display.
We believe that there is growing demand for mobile access to
    high-resolution content in both the consumer and industrial and
    defense markets.
1
Table of Contents
Our
    Products
We offer products that use our proprietary technology and are
    designed to meet the unique requirements of the consumer,
    industrial and defense markets.
Binocular
    Video Eyewear Products
Each binocular Video Eyewear product contains two microdisplay
    screens, one in front of each eye, mounted in a frame attached
    to eyeglass-style temples with headphones. These products enable
    mobile private viewing of video content on virtual displays that
    can simulate theater-sized screens. They are currently sold on
    the basis of resolution and their effective virtual viewing
    screen size. Our products today range from 320 × 240 pixels
    (Quarter Video Graphics Array or QVGA) to 800 × 600 pixels
    (Super Video Graphics Array or SVGA) resolution and provide
    virtual screen sizes of 44- to
62-inch
screens viewed at nine feet. We also offer an interactive
    version for PC gaming which includes our proprietary head
    tracking technology, which enables the user to look around the
    environment being displayed in the game by simply moving his or
    her head, and a microphone to enable communication with others.
    Finally, we offer a binocular Video Eyewear product that
    integrates a high-resolution camera with digital magnification,
    designed to assist and improve the remaining vision of persons
    suffering from macular degeneration.
Monocular
    Video Eyewear Products
Our
    Tac-Eye
®
monocular (single eye) Video Eyewear products are designed to
    clip on to a pair of ballistic sunglasses, a head set or
    conventional safety goggles. They can be used with rugged
    laptops, security and night vision cameras and thermal night
    vision sights, including those sights for which we currently
    build the display drive electronics as a
sub-contractor
to the US Department of Defense.
    Tac-Eye
®
enables users to have wearable, private, hands-free and
    glanceable access to high-resolution content or information
    while retaining most of their real world view.
Defense
Sub-Assembly
and Custom Solutions
We are involved in several programs as part of contracting teams
    that produce thermal night vision sights to the US Department of
    Defense. We design and manufacture many of the display drive
    electronic subassemblies for light, medium, and heavy weight
    thermal weapon sighting systems for the US and other defense
    forces. When possible, we obtain a first right of refusal to be
    the volume manufacturer of our proprietary display subassemblies
    as part of our contracting process for the custom design of
    products.
Our
    Strategy
Our strategy is to establish and maintain a leadership position
    as a worldwide supplier of Video Eyewear and other virtual
    display technology solutions. We intend to offer our
    technologies across major markets, platforms and applications.
    We will strive to be an innovator in designing virtual display
    devices that enable new mobile video viewing as well as general
    entertainment applications.
To maintain and enhance our position as a leading provider of
    virtual display solutions, we intend to:
•
improve our brand name recognition;
•
develop products for large markets;
•
broaden and develop strategic relationships and partnerships;
•
expand market awareness for virtual display solutions;
•
maintain and exploit any cost advantage our technology can
    provide us;
•
extend our proprietary technology leadership; and
•
establish multiple revenue sources.
2
Table of Contents
Company
    Information
We were incorporated under the Delaware General Corporation Law
    in 1997 as VR Acquisition Corp. In 1997 we changed our name to
    Kaotech Corporation. In 1998 we changed our name to Interactive
    Imaging Systems, Inc. In 2004 we changed our name to Vicuity
    Corporation and then to Icuiti Corporation. In September 2007 we
    changed our name to Vuzix Corporation.
Our principal executive offices are located at 75 Town Centre
    Drive, Rochester, New York 14623. Our telephone number is
(585) 359-5900.
We maintain an Internet website at
www.vuzix.com
. The
    information contained on, connected to or that can be accessed
    via our website is not part of this prospectus. We have included
    our website address in this prospectus as an inactive textual
    reference only and not as an active hyperlink.
Our wholly-owned direct subsidiary is Vuzix (Europe) Limited,
    which we refer to in this prospectus as Vuzix Europe. Vuzix
    Europe was incorporated on April 10, 2008 pursuant to the
    provisions of the Companies Act (England and Wales). The
    registered and head office of Vuzix Europe is located at St.
    John's House, 5 South Parade, Summertown, Oxford OX2 7JL.
The
    Offering
Securities offered by Vuzix
Up to •  units ( •  units if the
    agents' over-allotment option is exercised in full); each
    unit consisting of one share of our common stock, par value
    $0.001 per share, and one half of one common stock purchase
    warrant.
Up to •  shares of our common stock
    ( •  shares if the agents'
    over-allotment option is exercised in full) (1)
Up to •  common stock purchase warrants
    ( •  common stock purchase warrants if the
    agents' over-allotment option is exercised in full). Each
    whole warrant will entitle its holder to purchase one share of
    our common stock at Cdn$ •  per share at any time
    for •  months after the closing of this offering.
Common stock to be outstanding after this offering
• shares ( •  shares if the
    agents' over-allotment option is exercised in full) (2)
Over-allotment option
We have granted the agents an over-allotment option, exercisable
    for a period of 30 days from the date of the closing of
    this offering, to sell additional shares of common stock and
    whole warrants up to the lesser of the agents'
    over-allocation position determined as of the time of closing of
    the offering and •  shares of common stock
    and •  whole warrants (15% of the number of
    shares and warrants offered by us under this prospectus) or any
    combination thereof at a price of Cdn$ •  per
    share and Cdn$ •  per warrant to cover
    over-allotments, if any, and for market stabilization purposes.
    For greater clarity, these warrants will only be issued for the
    purpose of distribution of units to purchasers. The aggregate
    number of shares and warrants issuable to purchasers pursuant to
    the offering will not exceed • 
    and • , respectively. If the over-allotment
    option is exercised in full, the total price to the public will
    be Cdn$ • , the commission payable to the agents
    will be Cdn$ •  and the net proceeds to us will
    be Cdn$ • . For additional information see
    "Underwriting."
Agent Compensation
As consideration for their services, the Canadian agents will
    receive: (i) a commission equal to 8% of the gross proceeds
    of the offering; (ii) options entitling the Canadian agents
    to purchase that number of shares of our common stock and
    warrants equal to 12.5% of the aggregate number of shares of our
    common stock and warrants sold under the offering (including the
    shares and warrants issued upon exercise of the over-allotment
    option), at the offering price per share and warrant, for a
    period of 12 months from the closing date; and (iii) a
    non-refundable due diligence fee of Cdn$15,000. The Canadian
    agents will also be reimbursed for their reasonable fees and
    expenses including the reasonable legal fees and disbursements
    of legal
3
Table of Contents
counsel to the agents. The Canadian agents may appoint selling
    agents in the United States, including Canaccord Adams Inc.,
    which may be paid cash selling commissions not to exceed 6% of
    the gross proceeds of the offering in the United States and
    options entitling US selling agents to purchase that number of
    shares of our common stock and warrants sold in the United
    States under the offering (including the shares and warrants
    issued upon exercise of the over-allotment option) equal to 8%
    of the aggregate number of shares of our common stock and
    warrants at the initial public offering price for a period of 12
    months from the closing date. The commission paid to US selling
    agents will be paid by the Canadian agents from their
    commissions.
In consideration of certain fiscal advisory services rendered by
    the Canadian agents to us pursuant to a fiscal advisory fee
    agreement between us and the Canadian agents, we have agreed to
    issue to the Canadian agents at the closing of this offering, in
    payment of a fiscal advisory fee, that number of shares of our
    common stock equal to, depending on the gross proceeds of the
    offering, between 1.0% and 2.0% of our common stock issued and
    outstanding immediately upon the closing of the offering. The
    issuance of these shares to the Canadian agents is not covered
    by this prospectus. These shares will be subject to resale
    restrictions under applicable United States and Canadian
    securities legislation and a contractual lock-up agreement for
    one year. See "Underwriting — Fiscal Advisory Fee
    Agreement."
Use of proceeds
Based on an assumed initial public offering price of
    Cdn$ •  per unit, after payment of commissions
    and expenses we expect to receive gross proceeds of
    Cdn$ •  and net proceeds of
    Cdn$ •  (or gross proceeds of
    Cdn$ •  and net proceeds of
    Cdn$ •  if the over-allotment option is exercised
    in full). We expect to use $ •  million of the
    net proceeds of this offering to repay outstanding indebtedness,
    including accrued interest. The indebtedness to be repaid
    includes $95,000 in principal amount plus interest payable to
    our President and Chief Executive Officer. We intend to use the
    remainder of the net proceeds from this offering for research
    and development expenses; capital expenditures; selling,
    marketing, general and administrative expenses; possible
    acquisitions of businesses, technologies or other assets; and
    general corporate purposes. For additional information see
    "Use of Proceeds."
Risk Factors
See "Risk Factors" and other information included in
    this prospectus for a discussion of factors you should carefully
    consider before deciding to invest in our securities.
(1)
Consists of (i) up to •  shares
    ( •  shares if the over-allotment option is
    exercised in full) included in the units; (ii) up
    to •  shares ( •  shares
    if the over-allotment option is exercised in full) issuable upon
    exercise of the common stock purchase warrants included in the
    units; (iii) •  shares issued to the agents
    in payment of a fiscal advisory fee; and (iv) up
    to •  shares ( •  shares
    if the over-allotment option is exercised in full) and up to an
    additional •  shares
    ( •  shares if the over-allotment option is
    exercised in full) issuable upon exercise of common stock
    purchase warrants issuable upon exercise of the options issued
    to the agents as compensation.
(2)
Does not include (i) up to 15,304,554 shares issuable
    upon exercise of options granted under our 2007 Amended and
    Restated Stock Option Plan; (ii) 1,200,000 shares
    issuable upon exercise of options granted under our 2009
    Non-Employee Director Stock Option Plan subject to the
    effectiveness of the registration statement of which this
    prospectus forms a part; (iii) any of the shares described
    in footnote (1) above except •  of those
    described in clause (iii) in footnote (1); (iv) up to
    7,060,914 shares issuable upon conversion of 168,500
    outstanding shares of our Series C 6% Convertible
    Preferred Stock (Series C Preferred Stock), together with
    all accrued and unpaid dividends thereon as of the date of this
    prospectus, at the rate of $0.2917 per share; (v) up to
    4,599,045 shares issuable upon conversion of $575,000 in
    aggregate principal amount of convertible promissory notes
    outstanding, together with all accrued and unpaid interest
    thereon as of the date of this prospectus; and (vi) up to
    7,172,160 shares issuable upon exercise of outstanding warrants.
4
Table of Contents
Selected
    Summary Financial Data
The following tables present our summary financial data and
    should be read together with our financial statements and
    accompanying notes and "Management's Discussion and
    Analysis of Financial Condition and Results of Operations"
    appearing elsewhere in this prospectus. The summary financial
    data for the years ended December 31, 2008, 2007 and 2006
    are derived from our audited annual financial statements, which
    are included elsewhere in this prospectus. The unaudited summary
    financial data as of March 31, 2009 and for the three
    months ended March 31, 2009 and 2008 have been derived from
    our unaudited interim financial statements, which are included
    elsewhere in this prospectus, and include all adjustments,
    consisting of normal recurring adjustments, necessary for a fair
    presentation of our financial position and results of operations
    for these periods.
Year Ended December 31,
Three Months Ended March 31,
Statement of Operations Data
2008
2007
2006
2009
2008
(Unaudited)
(Unaudited)
Sales
$
12,564,487
$
10,146,379
$
9,538,308
$
3,043,994
$
1,720,914
Cost of Sales
8,863,508
6,783,473
5,767,550
1,856,683
1,487,349
Gross Margin
3,700,979
3,362,906
3,770,758
1,187,311
233,565
Operating Expenses
Research and development
3,366,518
2,365,412
1,279,239
502,011
736,716
Selling and marketing
2,128,625
1,920,164
1,191,800
449,266
449,562
General and administrative
2,299,685
1,718,627
1,560,278
478,253
533,799
Depreciation and amortization
510,133
374,078
276,989
138,834
123,696
Total operating expenses
8,304,961
6,378,281
4,308,306
1,568,364
1,843,773
Profit (Loss) from operations
(4,603,982
)
(3,015,375
)
(537,548
)
(381,053
)
(1,610,208
)
Interest and other income (expense)
188
2,549
313
—
—
Foreign exchange (loss) gain
(24,216
)
—
—
(1,272
)
366
Interest expense
(260,977
)
(241,692
)
(179,019
)
(65,376
)
(41,600
)
Legal settlement
—
96,632
—
—
—
Tax (expense) benefit
(5,212
)
98,372
(3,700
)
(888
)
(753
)
Total tax and other income (expense)
(290,217
)
(44,139
)
(182,406
)
(67,536
)
(41,987
)
Net (Loss)
$
(4,894,199
)
$
(3,059,514
)
$
(719,954
)
$
(448,589
)
$
(1,652,195
)
Income (loss) per share:
Basic and fully diluted*
$
(0.0229
)
$
(0.0160
)
$
(0.0047
)
$
(0.0022
)
$
(0.0084
)
Weighted average common shares outstanding:
Basic and fully diluted*
218,268,927
197,973,139
173,268,048
220,268,927
200,424,027
*
All outstanding warrants, options, and convertible debt are
    anti-dilutive, therefore basic and diluted earnings per share
    are the same for all periods.
Year Ended December 31,
Three Months Ended March 31,
Cash Flow Data
2008
2007
2006
2009
2008
(Unaudited)
(Unaudited)
Cash flows provided by (used in) operating activities
$
(1,285,449
)
$
(3,295,900
)
$
120,053
$
(761,919
)
$
(208,047
)
Cash flows (used in) investing activities
(549,804
)
(316,743
)
(479,236
)
(60,208
)
(164,927
)
Cash flows provided by financing activities
2,289,116
3,408,328
874,569
262,559
77,652
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As of December 31,
As of March 31,
Balance Sheet Data
2008
2007
2006
2009
2008
(Unaudited)
(Unaudited)
Cash and cash equivalents
$
818,719
$
364,856
$
569,171
$
259,151
$
69,534
Working Capital (deficiency)
(1,846,289
)
966,658
69,766
(1,892,747
)
(651,720
)
Total Assets
6,221,897
6,967,254
5,013,263
5,277,583
5,316,225
Long-Term Liabilities
1,754,379
2,014,476
1,980,476
1,762,408
2,015,453
Accumulated (deficit)
(14,687,276
)
(9,691,977
)
(6,531,363
)
(15,161,140
)
(11,369,383
)
Total Stockholders' equity (deficit)
(2,089,942
)
423,236
(603,954
)
(2,223,119
)
(1,190,888
)
6
Table of Contents
RISK
    FACTORS
An investment in our securities involves a high degree of
    risk. You should carefully consider the risks described below,
    together with all of the other information included in this
    prospectus, before making an investment decision. If any of the
    following risks actually occurs, our business, financial
    condition or results of operations could suffer. In that case,
    the market value of our securities could decline, and you may
    lose all or part of your investment.
RISKS
    RELATED TO OUR BUSINESS
We
    have a limited operating history in the Video Eyewear products
    industry.
We were formed in 1997 to develop and sell virtual reality and
    other personal display technology and products. Since our
    inception the majority of our sales have been derived from the
    sale of night vision display drive electronics and from research
    and development contracts with suppliers to the US government
    and others. In 2003, we discontinued our original virtual
    reality product line to focus on Video Eyewear products. We
    commenced limited initial sales of our monocular eyewear
    products in fiscal 2003 and commenced shipping our first
    binocular Video Eyewear model in February 2005. Accordingly,
    there is a limited amount of past experience upon which to
    evaluate our business and prospects, and a potential investor
    should consider the challenges, expenses, delays and other
    difficulties involved in the development of our business,
    including the continued development of our technology and the
    achievement of market acceptance for products using our
    technology.
We
    have incurred net losses since our inception, and we may incur
    net losses in the foreseeable future.
We incurred annual net losses of $4,894,199 in 2008, $3,059,514
    in 2007 and $719,954 in 2006 and net losses of $448,589 and
    $1,652,195 for the three-month periods ended March 31, 2009
    and 2008, respectively. We had an accumulated deficit of
    $15,161,140 as of March 31, 2009.
We may not achieve or maintain profitability in the future. In
    particular, we expect that our expenses relating to sales and
    marketing and product development and support, as well as our
    general and administrative costs, will increase, requiring us to
    increase sales in order to achieve and maintain profitability.
    If we do not achieve and maintain profitability, our financial
    condition will be materially and adversely affected. We would
    eventually be unable to continue our operations unless we were
    able to raise additional capital. We may not be able to raise
    any necessary capital on commercially reasonable terms or at
    all. If we fail to achieve or maintain profitability on a
    quarterly or annual basis within the timeframe expected by
    investors, the market price of our common stock may decline.
We
    have historically depended on defense related engineering
    contracts and two customers for sales.
Since inception, the majority of our sales have been derived
    from the sale of night vision display drive electronics to two
    suppliers to the US government. Sales of night vision display
    drive electronics to these customers amounted to 20%, 17% and
    42% of our sales in 2008, 2007 and 2006, respectively, and 45%
    and 47% for the three-month periods ended March 31, 2009
    and 2008, respectively. We have no long-term contracts with
    these customers. A significant reduction or delay in orders from
    either of our significant customers would materially reduce our
    revenue and cash flow and adversely affect our ability to
    achieve or maintain profitability in the future.
The next largest source of revenues has been sales directly to
    the US Department of Defense, primarily for engineering
    programs. Such sales amounted to 12%, 54% and 27% of our sales
    in 2008, 2007 and 2006, respectively, and 9% and 0% for the
    three-month periods ended March 31, 2009 and 2008,
    respectively. We have no long-term contracts with the US
    government for engineering services. We plan to submit proposals
    for additional development contract funding. However,
    development contract funding is subject to legislative
    authorization and, even if funds are appropriated, such funds
    may be withdrawn based on changes in government priorities.
Together, these two groups of customers accounted for 32%, 71%
    and 69% of our sales in 2008, 2007 and 2006, respectively, and
    for 54% and 47% of our sales in the three-month periods ended
    March 31, 2009 and 2008. We may not be successful in
    obtaining new government contracts or in receiving further night
    vision display electronics orders. Our inability to obtain sales
    from government contracts could have a material adverse effect
    on
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our results of operations and would likely cause us to delay or
    slow our growth plans, resulting in lower net sales and
    adversely affect our liquidity and profitability.
Our US
    government defense contracts and subcontracts are subject to
    procurement laws and regulations.
Generally, US government contracts are subject to procurement
    laws and regulations. Some of the our contracts are governed by
    the Federal Acquisition Regulation (FAR), which lays out uniform
    policies and procedures for acquiring goods and services by the
    US government, and agency-specific acquisition regulations that
    implement or supplement the FAR. For example, the Department of
    Defense implements the FAR through the Defense Federal
    Acquisition Regulations (DFAR).
The FAR also contains guidelines and regulations for managing a
    contract after award, including conditions under which contracts
    may be terminated, in whole or in part, at the government's
    convenience or for default. If a contract is terminated for the
    convenience of the government, a contractor is entitled to
    receive payments for its allowable costs and, in general, the
    proportionate share of fees or earnings for the work done. If a
    contract is terminated for default, the government generally
    pays for only the work it has accepted. These regulations also
    subject us to financial audits and other reviews by the
    government of our costs, performance, accounting and general
    business practices relating to our government contracts, which
    may result in adjustment of our contract-related costs and fees.
Our US government contract and subcontract orders are funded by
    government budgets that are proposed by the President of the
    United States and reviewed and approved by the Congress. Funds
    allocated to government agencies are administered by the
    Executive Office of the President. There are two primary risks
    associated with this process. First, the process may be delayed
    or disrupted because of congressional schedules, negotiations
    over funding levels for programs or unforeseen national or world
    events. Second, funding for multi-year contracts can be changed
    in future appropriations. Either of these events could affect
    the allocation, timing, schedule and program content of our
    government contracts and subcontracts.
Our
    lack of long-term purchase orders and commitments could lead to
    a rapid decline in our sales and profitability.
All of our significant consumer division customers issue
    purchase orders solely in their own discretion, often only two
    to four weeks before the requested date of shipment. Our
    customers are generally able to cancel orders (without penalty)
    or delay the delivery of products on relatively short notice. In
    addition, our customers may decide not to purchase products from
    us for any reason. Any of our current customers may stop
    purchasing our products in the future. If those customers do not
    continue to purchase our products, our sales volume and
    profitability could decline rapidly with little or no warning
    whatsoever.
We cannot rely on long-term purchase orders or commitments to
    protect us from the negative financial effects of a decline in
    demand for our products. The limited certainty of product orders
    can make it difficult for us to forecast our sales and allocate
    our resources in a manner consistent with our actual sales.
    Moreover, our expense levels are based in part on our
    expectations of future sales and, if our expectations regarding
    future sales are inaccurate, we may be unable to reduce costs in
    a timely manner to adjust for sales shortfalls. Furthermore,
    because we depend on a small number of customers for the vast
    majority of our sales, the ramifications of these risks is
    greater than if we had a greater number of customers. As a
    result of our lack of long-term purchase orders and purchase
    commitments, we may experience a rapid decline in our sales and
    profitability.
Historically,
    a substantial portion of our assets has been comprised of
    accounts receivable representing amounts owed by a small number
    of customers. If any of these customers fails to pay us amounts
    owed in a timely manner, we could suffer a significant decline
    in cash flow and liquidity which, in turn, could cause us to be
    unable pay our liabilities and purchase adequate inventory to
    sustain or expand our sales volume.
Our accounts receivable represented approximately 30%, 53% and
    53% of our total current assets as of December 31, 2008,
    2007 and 2006, respectively, and 25% and 23% for the three-month
    periods ended March 31, 2009 and 2008, respectively. As of
    March 31, 2009, 46% of our accounts receivable represented
    amounts owed by
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two customers, each of which represented over 20% of the total
    amount of our accounts receivable. As a result of the
    substantial amount and concentration of our accounts receivable,
    if any of our major customers fails to pay us amounts owed in a
    timely manner, we could suffer a significant decline in cash
    flow and liquidity which could adversely affect our ability to
    pay our liabilities and to purchase inventory to sustain or
    expand our current sales volume and adversely affect our ability
    to continue our business.
In addition, our business is characterized by long periods for
    collection from our customers and short periods for payment to
    our suppliers, the combination of which may cause us to have
    liquidity problems. We experience an average accounts settlement
    period ranging from one month to as high as three months from
    the time we deliver our products to the time we receive payment
    from our customers. In contrast, we typically need to place
    certain deposits and advances with our suppliers on a portion of
    the purchase price. Because our payment cycle is considerably
    shorter than our receivable collection cycle, we may experience
    working capital shortages. Working capital management, including
    prompt and diligent billing and collection, is an important
    factor in our results of operations and liquidity. System
    problems, industry trends, our customers' liquidity
    problems or payment practices or other issues may extend our
    collection period, which would adversely impact our liquidity,
    our ability to pay our liabilities and to purchase inventory to
    sustain or expand our current sales volume, and adversely affect
    our ability to continue our business.
Our
    future growth and profitability could be adversely affected if
    our marketing initiatives are not effective in generating
    sufficient levels of brand awareness.
Since inception, the majority of our sales have been derived
    from the sale of night vision display electronics and from
    research and development contracts with suppliers to, or
    directly to the US government and other customers. Our long-term
    business plan contemplates that we will transition our business
    so that the majority of our sales are earned from consumer
    products sales. In connection with this transition, we are
    engaged in a variety of marketing initiatives intended to
    promote sales of our consumer products. Our future growth and
    profitability from our consumer products will depend in large
    part upon the effectiveness and efficiency of these marketing
    efforts, including our ability to:
•
create awareness of our brand and products, including general
    awareness of this new Video Eyewear product category;
•
identify the most effective and efficient levels of spending for
    marketing expenditures in our new target market;
•
effectively manage marketing costs (including creative and
    media) in order to maintain acceptable operating margins and
    return on marketing investment;
•
select the right markets in which to market; and
•
convert consumer awareness into actual product purchases.
Our planned marketing expenditures may not result in increased
    total sales or generate sufficient levels of product and brand
    name awareness. We may not be able to manage our marketing
    expenditures on a cost-effective basis.
The
    current decline and any future decline in general economic
    conditions could lead to reduced consumer demand for our
    products and otherwise have an adverse effect on our liquidity
    and profitability.
We believe that purchases of our consumer Video Eyewear products
    are dependent upon levels of discretionary spending by our
    customers. This means that our financial performance will be
    sensitive to changes in overall economic conditions that affect
    consumer spending. Consumer spending habits are affected by,
    among other things, prevailing economic conditions, levels of
    employment, salaries and wage rates, consumer confidence and
    consumer perception of economic conditions. As widely reported,
    general worldwide economic conditions have experienced a
    downturn due to, among other things, slower economic activity,
    concerns about inflation, decreased consumer confidence, reduced
    corporate profits and capital spending, and adverse business
    conditions. This can impact us
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through reduced sales, elongated selling cycles, delays in
    product implementation and increased competitive margin
    pressure. We are unable to accurately predict the likely
    duration and severity of the current disruption in financial
    markets and adverse economic conditions in the United States and
    other countries. The continuation of this downturn, the further
    deterioration of economic conditions in the United States or key
    international economies or uncertainty as to the economic
    outlook could reduce discretionary spending or cause a shift in
    consumer discretionary spending to other products. Any of these
    factors would likely cause us to delay or slow our growth plans,
    result in lower net sales and adversely affect our liquidity and
    profitability. Similarly, the tightening of credit markets may
    adversely affect our supplier base and increase the potential
    for one or more of our suppliers to experience financial
    distress or bankruptcy, which could materially and adversely
    affect our business.
Our
    consumer Video Eyewear sales are seasonal and our sales during
    the winter holiday season will greatly affect our operating
    results.
Historically, a high percentage of our consumer Video Eyewear
    product annual sales have been attributable to the winter
    holiday selling season. Like many manufacturers of consumer
    electronics products, we must make merchandising and inventory
    decisions for the winter holiday selling season well in advance
    of actual sales. Further compounding this forecasting are other
    fluctuations in demand for the consumer electronics products
    that work with our Video Eyewear products, often due to the same
    seasonal influences, as well as technological advances and new
    models which are often introduced later in the calendar year.
    Inaccurate projections of demand or deviations in the demand for
    our product can cause large fluctuations in both our fourth
    quarter results and could have a material adverse effect on our
    results of operations for the entire fiscal year. We expect that
    our fourth quarter sales of consumer products will remain
    dependent on our performance during the winter holiday selling
    season.
Our
    Video Eyewear products require ongoing research and
    development.
Our research and development efforts remain subject to all of
    the risks associated with the development of new products based
    on emerging and innovative technologies, including, for example,
    unexpected technical problems or the possible insufficiency of
    funds for completing development of these products. If we
    experience technical problems or delays, further improvements in
    our products and the introduction of future products could be
    delayed, and we could incur significant additional expenses and
    our business may fail.
We anticipate that we will require additional funds and further
    US government engineering services contracts to maintain our
    current levels of expenditure for research and development of
    new products and technologies, and to obtain and maintain
    patents and other intellectual property rights in these
    technologies, the timing and amount of which are difficult to
    forecast. Our cash on hand after the successful completion of
    this offering coupled with the possibility of further negative
    cash flow from operations may not be sufficient to meet all of
    our future needs. We have no commitment for additional funds.
    Any funds we need may not be available on commercially
    reasonable terms or at all. If we cannot obtain any necessary
    additional capital when needed, we might be forced to reduce our
    research and development efforts which would materially and
    adversely affect our business. If we attempt to raise capital in
    an offering of shares of our common stock, preferred stock,
    convertible securities or warrants, or if we engage in
    acquisitions involving the issuance of such securities, our
    then-existing stockholders' interests will be diluted.
Our
    planned future products are dependent on advances in technology
    by other companies.
We rely on and will continue to rely on technologies (including
    microdisplays) that are developed and produced by other
    companies. The commercial success of certain of our planned
    future products will depend in part on advances in these and
    other technologies by other companies. We may, from time to
    time, contract with and support companies developing key
    technologies in order to accelerate the development of them for
    our specific uses. Such activities might not result in useful
    technologies or components for us.
Our
    business depends on our development of new products and
    technologies.
The market for our products is characterized by rapid changes in
    products, designs and manufacturing process technologies. Our
    success depends to a large extent on our ability to develop and
    manufacture new products and
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technologies to match the varying requirements of different
    customers and groups in order to establish a competitive
    position and become profitable. Furthermore, we must adapt our
    products and processes to technological changes and emerging
    industry standards and practices on a cost-effective and timely
    basis. Our failure to accomplish any of the above could harm our
    business and operating results.
Consumer electronics products are subject to rapid technological
    changes. Companies within the consumer electronics industry are
    continuously developing new products with increased performance
    and functionality. This puts pricing pressure on existing
    products and constantly threatens to make them, or causes them
    to be, obsolete. Our typical product's life cycle is
    relatively short, generating lower average selling prices as the
    cycle matures. If we fail to accurately anticipate the
    introduction of new technologies, we may possess significant
    amounts of obsolete inventory that can only be sold at
    substantially lower prices and gross margins than we
    anticipated. In addition, if we fail to accurately anticipate
    the introduction of new technologies, we may be unable to
    compete effectively due to our failure to offer products most
    demanded by the marketplace. If any of these failures occur, our
    sales, profit margins and profitability will be adversely
    affected.
Microdisplay-based
    personal displays compete with other technologies in the market
    for mobile displays.
The mobile display market is dominated by displays larger than
    one-inch, based on direct view liquid crystal display
    (LCD) and organic light emitting display (OLED) technology.
    A number of companies have made and continue to make substantial
    investments in, and are conducting research to improve
    characteristics of, small direct view LCDs. Many of the leading
    manufacturers of these larger direct view LCDs, including LG
    Electronics, Royal Philips Electronics, Samsung Electronics Co.,
    Ltd., Sony Corporation and Sharp Corporation, are large,
    established companies with global marketing capabilities,
    widespread brand recognition and extensive financial resources.
    Advances in LCD and OLED technology or other technologies may
    overcome their current limitations and permit them to remain or
    become more attractive technologies for personal viewing
    applications, which could limit the potential market for our
    Video Eyewear technology and cause our business strategy to fail.
It is difficult to assess or predict with any certainty the
    potential size, timing and viability of market opportunities for
    our microdisplay-based Video Eyewear products or their market
    acceptance. Market acceptance of Video Eyewear technology will
    depend, in part, upon consumer acceptance of
near-to-eye
displays and upon microdisplay technology providing benefits
    comparable to or greater than those provided by alternative
    direct view display technology at a competitive price. If
    consumers fail to accept
near-to-eye
displays in the numbers we anticipate or as soon as we
    anticipate, the sales of our Video Eyewear products and our
    results of operations would be adversely affected and our
    business strategy may fail.
Other
    microdisplay-based personal display technology may be more
    successful than ours.
In addition to competing with direct view displays, we also
    compete with microdisplay-based personal display technologies
    that have been developed by other companies. Our primary
    personal display competitors include DaeYang Co., Ltd., Ilixco
    Inc., MyVu Corporation (MyVu), Carl Zeiss, Inc. (Zeiss), 5DT
    Inc., eMagin Corporation (eMagin), Kopin Corporation (Kopin),
    Lumus Ltd. (Lumus) and Kaiser Electro Optics Inc. (Kaiser).
    Additionally, at recent technology exhibitions Sony and Brother
    International Corporation have demonstrated personal display
    glasses that look like sunglasses. Most of our
    microdisplay-based competitors have greater financial,
    marketing, distribution and technical resources than we do.
    Certain of these competing microdisplay-based technologies
    entered the marketplace prior to us. Moreover, our competitors
    may succeed in developing new microdisplay-based personal
    display technologies that are more affordable or have more or
    more desirable features than our technology. If our products are
    unable to capture a substantial portion of the personal display
    market, our business strategy may fail.
Our
    business and products are subject to government regulation in
    the US and in Europe.
Our products must comply with certain requirements of the US
    Federal Communications Commission (FCC) regulating
    electromagnetic radiation in order to be sold in the US and with
    comparable requirements of the regulatory authorities of the
    European Union (EU) and other jurisdictions in order to be sold
    in those jurisdictions. We are also subject to various
    governmental regulations related to toxic, volatile, and other
    hazardous chemicals
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used in connection with parts of our manufacturing process,
    including the Restriction of Certain Hazardous Substances
    Directive (RoHS) issued by the EU effective July 1, 2006.
    This directive restricts the distribution of products within the
    EU that exceed very low maximum concentration values of certain
    substances, including lead.
We believe that all our current consumer products comply with
    the regulations of the jurisdictions in which they are sold. Our
    failure to comply with these regulations in the future could
    result in the imposition of fines or in the suspension or
    cessation of our operations in the applicable jurisdictions.
    Additional regulations applicable to our business may be enacted
    in the United States or other jurisdictions in the future.
    Compliance with regulations enacted in the future could
    substantially increase our cost of doing business or otherwise
    have a material adverse effect on our results of operations and
    our business.
Our
    products will likely experience rapidly declining unit
    prices.
In the markets in which we expect to compete, prices of
    established products tend to decline significantly over time. In
    order to maintain our profit margins over the long term, we
    believe that we will need to continuously develop product
    enhancements and new technologies that will either slow price
    declines of our products or reduce the cost of producing and
    delivering our products. While we anticipate many opportunities
    to reduce production costs over time, we may not be able to
    reduce our production costs. We expect to attempt to offset the
    anticipated decrease in our average selling price by introducing
    new products, increasing our sales volumes or adjusting our
    product mix. If we fail to do so, our results of operations will
    be materially and adversely affected.
If we
    cannot obtain and maintain appropriate patent and other
    intellectual property rights protection for our technology, our
    business will suffer.
The value of our personal display and related technologies is
    dependent on our ability to secure and maintain appropriate
    patent and other intellectual property rights protection. We
    intend to continue to aggressively pursue additional patent
    protection for our new products and technology. Although we own
    many patents covering our technology that have already been
    issued, we may not be able to obtain additional patents that we
    apply for, or that any of these patents, once issued, will give
    us commercially significant protection for our technology, or
    will be found valid if challenged. Moreover, we have not
    obtained patent protection for some of our technology in all
    foreign countries in which our products might be manufactured or
    sold. In any event, the patent laws and enforcement regimes of
    other countries may differ from those of the United States as to
    the patentability of our personal display and related
    technologies and the degree of protection afforded.
Any patent or trademark owned by us may be challenged and
    invalidated or circumvented. Patents may not issue from any of
    our pending or future patent applications. Any claims and issued
    patents or pending patent applications may not be broad or
    strong enough and may not be issued in all countries where our
    products can be sold or our technologies can be licensed to
    provide meaningful protection against any commercial damage to
    us. Further, others may develop technologies that are similar or
    superior to our technologies, duplicate our technologies or
    design around the patents owned by us. Effective intellectual
    property protection may be unavailable or limited in certain
    foreign countries. Despite our efforts to protect our
    proprietary rights, unauthorized parties may attempt to copy or
    otherwise use aspects of our processes and devices that we
    regard as proprietary. Policing unauthorized use of our
    proprietary information and technology is difficult and our
    efforts to do so may not prevent misappropriation of our
    technologies. In the event that our intellectual property
    protection is insufficient to protect our intellectual property
    rights, we could face increased competition in the market for
    our products and technologies, which could have a material
    adverse effect on our business, financial condition and results
    of operations.
We may become engaged in litigation to protect or enforce our
    patent and other intellectual property rights or in
    International Trade Commission proceedings to abate the
    importation of goods that would compete unfairly with our
    products. In addition, we may have to participate in
    interference or reexamination proceedings before the
    US Patent and Trademark Office, or in opposition,
    nullification or other proceedings before foreign patent
    offices, with respect to our patents or patent applications. All
    of these actions would place our patents and other intellectual
    property rights at risk and may result in substantial costs to
    us as well as a diversion of management attention. Moreover, if
    successful, these actions could result in the loss of patent or
    other intellectual property rights protection for the key
    technologies on which our business strategy depends.
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In addition, we rely in part on unpatented proprietary
    technology, and others may independently develop the same or
    similar technology or otherwise obtain access to our unpatented
    technology. To protect our trade secrets, know-how and other
    proprietary information, we require employees, consultants,
    financial advisors and strategic partners to enter into
    confidentiality agreements. These agreements may not provide
    meaningful protection for our trade secrets, know-how or other
    proprietary information in the event of any unauthorized use,
    misappropriation or disclosure of those trade secrets, know-how
    or other proprietary information. In particular, we may not be
    able to fully or adequately protect our proprietary information
    as we conduct discussions with potential strategic partners. If
    we are unable to protect the proprietary nature of our
    technology, it will harm our business.
Despite our efforts to protect our intellectual property rights,
    intellectual property laws afford us only limited protection. A
    third party could copy or otherwise obtain information from us
    without authorization. Accordingly, we may not be able to
    prevent misappropriation of our intellectual property or to
    deter others from developing similar products or services.
    Further, monitoring the unauthorized use of our intellectual
    property is difficult. Litigation may be necessary to enforce
    our intellectual property rights or to determine the validity
    and scope of the proprietary rights of others. Litigation of
    this type could result in substantial costs and diversion of
    resources, may result in counterclaims or other claims against
    us and could significantly harm our results of operations. In
    addition, the laws of some foreign countries do not protect our
    proprietary rights to the same extent as do the laws of the
    United States.
As is commonplace in technology companies, we employ individuals
    who were previously employed at other technology companies. To
    the extent our employees are involved in research areas that are
    similar to those areas in which they were involved at their
    former employers, we may be subject to claims that such
    employees or we have, inadvertently or otherwise, used or
    disclosed the alleged trade secrets or other proprietary
    information of the former employers. Litigation may be necessary
    to defend against such claims. Litigation of this type could
    result in substantial costs to us and divert our resources.
We also depend on trade secret protection through
    confidentiality and license agreements with our employees,
    subsidiaries, licensees, licensors and others. We may not have
    agreements containing adequate protective provisions in every
    case, and the contractual provisions that are in place may not
    provide us with adequate protection in all circumstances. The
    unauthorized reproduction or other misappropriation of our
    intellectual property could diminish the value of our brand,
    competitive advantages or goodwill and result in decreased sales.
We may
    incur substantial costs or lose important rights as a result of
    litigation or other proceedings relating to our products,
    patents and other intellectual property rights.
In recent years, there has been significant litigation involving
    patents and other intellectual property rights in many
    technology-related industries. Until recently, patent
    applications were retained in secrecy by the US Patent and
    Trademark Office until and unless a patent was issued. As a
    result, there may be US patent applications pending of which we
    are unaware that may be infringed by the use of our technology
    or a part thereof, thus substantially interfering with the
    future conduct of our business. In addition, there may be issued
    patents in the United States or other countries that are
    pertinent to our business of which we are not aware. We and our
    customers could be sued by other parties for patent infringement
    in the future. Such lawsuits could subject us and them to
    liability for damages or require us to obtain additional
    licenses that could increase the cost of our products, which
    might have an adverse affect on our sales.
In addition, in the future we may assert our intellectual
    property rights by instituting legal proceedings against others.
    We may not be able to successfully enforce our patents in any
    lawsuits we may commence. Defendants in any litigation we may
    commence to enforce our patents may attempt to establish that
    our patents are invalid or are unenforceable. Any patent
    litigation could lead to a determination that one or more of our
    patents are invalid or unenforceable. If a third party succeeds
    in invalidating one or more of our patents, that party and
    others could compete more effectively against us. Our ability to
    derive sales from products or technologies covered by these
    patents could be adversely affected.
Whether we are defending the assertion of third party
    intellectual property rights against our business as a result of
    the use of our technology, or we are asserting our own
    intellectual property rights against others, such litigation can
    be complex, costly, protracted and highly disruptive to our
    business operations by diverting the
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attention and energies of management and key technical
    personnel. As a result, the pendency or adverse outcome of any
    intellectual property litigation to which we are subject could
    disrupt business operations, require the incurrence of
    substantial costs and subject us to significant liabilities,
    each of which could severely harm our business.
Plaintiffs in intellectual property cases often seek injunctive
    relief. Any intellectual property litigation commenced against
    us could force us to take actions that could be harmful to our
    business and thus to our sales, including the following:
•
discontinuing selling the products that incorporate or otherwise
    use technology that contains our allegedly infringing
    intellectual property;
•
attempting to obtain a license to the relevant third party
    intellectual property, which may not be available on reasonable
    terms or at all; or
•
attempting to redesign our products to remove our allegedly
    infringing intellectual property.
If we are forced to take any of the foregoing actions, we may be
    unable to manufacture and sell products that incorporate our
    technology at a profit or at all. Furthermore, the measure of
    damages in intellectual property litigation can be complex, and
    is often subjective or uncertain. If we were to be found liable
    for infringement of proprietary rights of a third party, the
    amount of damages we might have to pay could be substantial and
    is difficult to predict. Decreased sales of our products
    incorporating our technology would adversely affect our sales.
    Any necessity to procure rights to the third party technology
    might cause us to negotiate the royalty terms of the third party
    license which could increase our cost of production or, in
    certain cases, terminate our ability to build some of our
    products entirely.
Our
    failure to renew, register or otherwise protect our trademarks
    could have a negative impact on the value of our brand names and
    our ability to use those names in certain geographical
    areas.
We believe our copyrights and trademarks are critical to our
    success. We rely on trademark, copyright and other intellectual
    property laws to protect our proprietary rights. If we fail to
    properly register and otherwise protect our trademarks, service
    marks and copyrights, we may lose our rights, or our exclusive
    rights, to them. In that case, our ability to effectively market
    and sell our products and services could suffer, which could
    harm our business.
There
    may be negative effects on eyesight from the long-term use of
    our products.
The personal display products that we currently market or may
    introduce and market in the future are new and utilize new
    technology. While virtual display technology has been in use
    over the past 25 years, sales to the general public have
    been limited. Extensive and continual viewing of any display,
    including standard computer monitors, for hours each day has the
    potential to negatively affect eyesight. Accordingly, it is
    possible that prolonged use of our products may adversely affect
    a user's eyesight. We design our products with these
    considerations in mind to attempt to minimize any potential
    negative impact. We warn users that extensive daily use without
    appropriate rest periods may cause eye fatigue that could result
    in temporary or permanent damage (in much the same way that a
    computer monitor manufacturers now warn users about long-term
    computer use). Despite our efforts, we may be unable to overcome
    this risk and such risk could result in claims against us by
    users of our products. Any such claims, whether or not we are
    ultimately held liable for them, could diminish the value of our
    brand, competitive advantages or goodwill and may result in
    decreased sales and we could incur significant expense in
    defending against any such claims. In addition, if we are
    ultimately held liable for any such claims, the resulting
    liabilities may have a material adverse effect on our business,
    financial condition and results of operations.
Our
    business and products may expose us to product liability
    claims.
Our business may expose us to product liability claims. Although
    no such claims have been brought against us to date, and to our
    knowledge no such claim is threatened or likely, we may face
    liability to product users for damages resulting from the design
    or manufacture of our products. Any such claims, whether or not
    we are ultimately held liable for them, could diminish the value
    of our brand, competitive advantages or goodwill and result in
    decreased sales and we could incur significant expense in
    defending against any such claims. While we plan to obtain and
    maintain product liability insurance coverage, product liability
    claims made against us may exceed
14
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coverage limits or fall outside the scope of such coverage.
    Also, insurance may not be available at commercially reasonable
    rates or at all. We do not have any such product liability
    insurance in effect.
We are
    exposed to currency fluctuations, which may have an adverse
    effect on us.
A substantial majority of our sales and cost of components are
    denominated in US dollars. As our business grows both our sales
    and production costs may increasingly be denominated in other
    currencies. Where such sales or production costs are denominated
    in other currencies, they are converted to US dollars for the
    purpose of calculating any sales or costs to us. Our sales may
    decrease as a result of any appreciation of the US dollar
    against these other currencies. The proceeds of this offering
    will be denominated in Canadian dollars and any substantial
    appreciation of the US dollar against the Canadian dollar during
    this offering may materially adversely affect our liquidity and
    capital resources.
The majority of our current expenditures are incurred in US
    dollars and many of our components come from countries that
    currently peg their currency against the US dollar. If the US
    dollar depreciates versus these foreign currencies, additional
    US dollars will be required to fund our purchases of these
    components.
Although we do not currently enter into currency option
    contracts or engage in other hedging activities, we may do so in
    the future. We can not assure you that we will undertake any
    such hedging activities or that, if we do so, they will be
    successful in reducing the risks to us of our exposure to
    foreign currency fluctuations.
Due to
    our significant level of international operations, we are
    subject to international operational, financial, legal and
    political risks.
A substantial part of our operations are expected to be outside
    of the United States and many of our customers and suppliers
    have some or all of their operations in countries other than the
    United States. Risks associated with our doing business outside
    of the United States include:
•
compliance with a wide variety of foreign laws and regulations,
    particularly labor, environmental and other laws and regulations
    that govern our operations in those countries;
•
legal uncertainties regarding taxes, tariffs, quotas, export
    controls, export licenses and other trade barriers;
•
economic instability in the countries of our suppliers and
    customers, particularly in the Asia-Pacific region, causing
    delays or reductions in orders for their products and therefore
    our sales;
•
political instability in the countries in which our suppliers
    operate, particularly in China and Taiwan;
•
difficulties in collecting accounts receivable and longer
    accounts receivable payment cycles; and
•
potentially adverse tax consequences.
Any of these factors could harm our own, our suppliers' and
    our customers' international operations and businesses and
    impair our and their ability to continue expanding into
    international markets.
Our
    success depends on attracting and retaining highly skilled and
    qualified technical and consulting personnel.
Changes in our management could have an adverse effect on our
    business. This is especially an issue while our staff is small.
    We are dependent upon the active participation of several key
    management personnel, including Paul J. Travers, our
    President and Chief Executive Officer (CEO). We do not carry key
    person life insurance on any of our senior management or other
    key personnel other than our CEO. While we have some life
    insurance coverage on our CEO, we do not believe it would be
    sufficient to completely protect us against losses we may suffer
    if his services were to become unavailable to us in the future.
We must hire highly skilled technical personnel as employees and
    as independent contractors in order to develop our products. As
    of the date of this prospectus we had 48 full-time
    employees. The competition for highly skilled technical,
    managerial and other personnel is intense and we may not be able
    to retain or recruit such personnel. Our recruiting and
    retention success is substantially dependent on our ability to
    offer competitive salaries
15
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and benefits to our employees. We must compete with companies
    that possess greater financial and other resources than we do
    and that may be more attractive to potential employees and
    contractors. To be competitive, we may have to increase the
    compensation, bonuses, stock options and other fringe benefits
    offered to employees in order to attract and retain such
    personnel. The costs of retaining or attracting new personnel
    may have a material adverse effect on our business and operating
    results. If we fail to attract and retain the technical and
    managerial personnel we need to be successful, our business,
    operating results and financial condition could be materially
    adversely affected.
Our
    failure to effectively manage growth could harm our
    business.
We have rapidly and significantly expanded the number and types
    of products we sell, and we will endeavor to further expand our
    product portfolio. We must regularly introduce new products and
    technologies, enhance existing products, and effectively
    stimulate customer demand for new products and upgraded versions
    of our existing products.
This expansion of our products places a significant strain on
    our management, operations and engineering resources.
    Specifically, the areas that are strained most by our growth
    include the following:
•
New Product Launch:
With the growth of our
    product portfolio, we experience increased complexity in
    coordinating product development, manufacturing, and shipping.
    As this complexity increases, it places a strain on our ability
    to accurately coordinate the commercial launch of our products
    with adequate supply to meet anticipated customer demand and
    effective marketing to stimulate demand and market acceptance.
    If we are unable to scale and improve our product launch
    coordination, we could frustrate our customers and lose retail
    shelf space and product sales;
•
Forecasting, Planning and Supply Chain
    Logistics:
With the growth of our product
    portfolio, we also experience increased complexity in
    forecasting customer demand, in planning for production, and in
    transportation and logistics management. If we are unable to
    scale and improve our forecasting, planning and logistics
    management, we could frustrate our customers, lose product sales
    or accumulate excess inventory; and
•
Support Processes:
To manage the growth of our
    operations, we will need to continue to improve our transaction
    processing, operational and financial systems, and procedures
    and controls to effectively manage the increased complexity. If
    we are unable to scale and improve these areas, the consequences
    could include: delays in shipment of product, degradation in
    levels of customer support, lost sales, decreased cash flows,
    and increased inventory. These difficulties could harm or limit
    our ability to expand.
Our
    facilities and information systems and those of our key
    suppliers could be damaged as a result of disasters or
    unpredictable events, which could have an adverse effect on our
    business operations.
We operate the vast majority of our business from three
    locations in the Rochester, New York area. We also rely on third
    party manufacturing plants in China and third party logistics,
    sales and marketing facilities in other parts of the world to
    provide key components of our Video Eyewear products and
    services necessary for our operations. If major disasters such
    as earthquakes, fires, floods, wars, terrorist attacks, computer
    viruses, transportation disasters or other events occur in any
    of these locations, or our information system or communications
    network or those of any of our key component suppliers breaks
    down or operates improperly as a result of such events, our
    facilities or those of our key suppliers may be seriously
    damaged, and we may have to stop or delay production and
    shipment of our products. We may also incur expenses relating to
    such damages. If production or shipment of our products or
    components is stopped or delayed or if we incur any increased
    expenses as a result of damage to our facilities, our business,
    operating results and financial condition could be materially
    adversely affected.
We
    generally do not have long-term contracts with our
    customers.
Our business is operated on the basis of short-term purchase
    orders and engineering contracts that typically do not exceed
    12 months in duration. We cannot guarantee that we will be
    able to obtain long-term contracts in the future. The purchase
    orders that we receive can often be cancelled or revised without
    penalty. In the absence of a backlog of orders that can only be
    canceled with penalty, we plan production on the basis of
    internally generated
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forecasts of demand, which makes it difficult to accurately
    forecast inventory requirements and sales. Large supply line
    commitments and large inventories of various components will be
    required to support our business and provide reasonable order
    fulfillment for customers. If we fail to accurately forecast
    operating requirements, our business may suffer and the value of
    your investment in us may decline.
Terrorism
    and the uncertainty of future terrorist attacks or war could
    reduce consumer confidence which could adversely affect our
    operating results.
Terrorist acts or acts of war may cause damage or disruption to
    our facilities, information systems, vendors, employees and
    customers, which could significantly harm our sales and results
    of operations. In the future, fears of war or additional acts of
    terrorism may have a negative effect on consumer confidence or
    consumer discretionary spending patterns, as well as have an
    adverse effect on the economy in general. This impact may be
    particularly harmful to our business because we expect to rely
    heavily on discretionary consumer spending and consumer
    confidence levels.
RISKS
    RELATED TO MANUFACTURING
We
    rely on two vendors to supply most of our
    microdisplays.
We do not currently own or operate any manufacturing facilities
    for microdisplays, one of the key components in our Video
    Eyewear products. We currently purchase almost all of the
    microdisplays used in our products from Kopin and eMagin. Kopin
    accounts for approximately 95% of our microdisplays by unit
    volume. We estimate that products incorporating Kopin
    microdisplays will account for approximately 56% of our sales in
    2009 and products incorporating eMagin microdisplays will
    account for approximately 19% of our sales in 2009. Our
    relationships with both Kopin and eMagin generally are on a
    purchase order basis and neither supplier has a contractual
    obligation to provide adequate supply, quality or acceptable
    pricing on a long-term basis. Both Kopin and eMagin could
    discontinue sourcing merchandise for us at any time. If Kopin or
    eMagin were to discontinue their relationships with us, or
    discontinue providing specific products to us, and we are unable
    to contract with a new supplier that can meet our requirements,
    or if Kopin or eMagin or such other supplier were to suffer a
    disruption in their production, we could experience disruption
    of our inventory flow, a decrease in sales and the possible need
    to redesign our products. Any such event could disrupt our
    operations and have an adverse effect on our business, financial
    condition and results of operations.
Certain other components and services necessary for the
    manufacture of our products are available from only a limited
    number of sources, and other components and services are only
    available from a single source.
Our inability to obtain sufficient quantities of high quality
    components or services on a timely basis could result in future
    manufacturing delays, increased costs and ultimately in reduced
    or delayed sales or lost orders which could materially and
    adversely affect our operating results.
The
    consumer electronics industry is subject to significant
    fluctuations in the availability of components. If we do not
    properly anticipate the need for critical components, we may be
    unable to meet the demands of our customers and
    end-users.
The availability of certain of the components that we require to
    produce our Video Eyewear products may decrease. As the
    availability of components decreases, the cost of acquiring
    those components ordinarily increases. High growth product
    categories have experienced chronic shortages of components
    during periods of exceptionally high demand. If we do not
    properly anticipate the need for or procure critical components,
    we may pay higher prices for those components, our gross margins
    may decrease and we may be unable to meet the demands of our
    customers and end-users, which could reduce our competitiveness,
    cause a decline in our market share and have a material adverse
    effect on our results of operations.
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Unanticipated
    disruptions in our operations or slowdowns by our suppliers,
    distributors and shipping companies could adversely affect our
    ability to deliver our products and service our
    customers.
Our ability to provide high quality customer service, process
    and fulfill orders and manage inventory depends on the
    efficient, timely and uninterrupted performance of our
    manufacturing and distribution facilities and our management
    information systems and the facilities and systems of our third
    party suppliers, distributors and shipping companies.
Any material disruption or slowdown in the operation of our
    manufacturing and distribution facilities or our management
    information systems, or comparable disruptions or slowdowns
    suffered by our principal suppliers, distributors or shippers
    could cause delays in our ability to receive, process and
    fulfill customer orders and may cause orders to be canceled,
    lost or delivered late, goods to be returned or receipt of goods
    to be refused. If any of these events occur, our sales and
    operating results could be materially and adversely affected.
If we
    acquire any companies or technologies in the future, they could
    prove difficult to integrate, disrupt our business, dilute
    stockholder value or have an adverse effect on our results of
    operations.
We intend to expand our business primarily through internal
    growth, but from time to time we may consider strategic
    acquisitions. Any future acquisition would involve numerous
    risks including:
•
potential disruption of our ongoing business and distraction of
    management;
•
difficulty integrating the operations and products of the
    acquired business;
•
unanticipated expenses related to technology integration;
•
exposure to unknown liabilities, including litigation against
    the companies we may acquire;
•
additional costs due to differences in culture, geographic
    locations and duplication of key talent; and
•
potential loss of key employees or customers of the acquired
    company.
Additionally, to finance an acquisition we may incur substantial
    amounts of indebtedness, which would affect our balance sheet
    and results of operations, or we may issue a substantial number
    of shares of our common stock, which may be dilutive to our
    stockholders. If we make acquisitions in the future,
    acquisition-related accounting charges may affect our balance
    sheet and results of operations. We may not be successful in
    addressing these risks or any other problems encountered in
    connection with any acquisitions.
RISKS
    RELATING TO THIS OFFERING
The
    offering price for our units may not be indicative of their fair
    market value.
The offering price for our units was determined in the context
    of negotiations between us and the agents. Accordingly, the
    offering price may not be indicative of the true fair market of
    our company or the fair market value of our units. We are making
    no representations that the offering price of our units under
    this prospectus bears any relationship to our assets, book
    value, net worth or any other recognized criteria of our value.
There
    is currently no trading market for our securities and an
    established trading market may not develop.
Our securities are not currently listed or quoted on any
    national securities exchange or national quotation system. We
    have applied for the listing of the shares of our common stock
    included in the units offered under this prospectus and the
    shares of our common stock issuable upon exercise of the
    warrants included in the units offered under this prospectus on
    the
TSX-V.
We do not intend to list the warrants offered under this
    prospectus on any securities exchange. Listing of our common
    stock will be subject to fulfilling all of the requirements of
    the
TSX-V.
The
TSX-V,
or any other exchange or quotation system, may not permit our
    common stock to be listed and traded. Even if our common stock
    is accepted for listing on the
TSX-V,
the
TSX-V
has
    continuing listing requirements and we may not be able to comply
    with those requirements and maintain our listing. If we fail to
    obtain an initial listing on the
TSX-V,
we
    may seek quotation of our common stock on the OTC
    Bulletin Board of the US Financial Industry
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Regulatory Authority, Inc. (FINRA). The OTC Bulletin Board
    is an inter-dealer, over-the-counter market that provides
    significantly less liquidity and transparency than the
TSX-V.
Therefore, prices for securities traded solely on the OTC
    Bulletin Board may be difficult to obtain and holders of
    common stock may be unable to resell their securities at or near
    their original offering price or at any price.
Shares
    of our common stock eligible for future sale in the public
    marketplace may adversely affect the market price of our common
    stock.
The price of our common stock could decline if there are
    substantial sales of our common stock in the public stock market
    after this offering. Based on the number of shares of common
    stock outstanding as of the date of this prospectus, upon
    completion of this offering, we anticipate
    that • shares of our common stock will be
    outstanding. All of the shares sold in this offering will be
    freely tradable without restriction or further registration
    under the Securities Act, except for any of those shares held by
    our "affiliates," as that term is defined in
    Rule 144 under the Securities Act, whose sales would be
    subject to the volume and manner of sale limitations of
    Rule 144 described below. In addition,
    117,436,334 shares of our common stock currently
    outstanding, or approximately • % of our common
    stock outstanding after this offering, may be resold at any
    time, subject to the
lock-up
agreements and
TSX-V
escrow
    arrangements described below. Our executive officers and
    directors currently own 82,987,673 shares, or
    approximately • % of our common stock outstanding
    after this offering, which are eligible for resale subject to
    the volume and manner of sale limitations of Rule 144 and
    subject to the
lock-up
agreements and
TSX-V
escrow
    arrangements described below. The remaining
    19,844,920 shares of our common stock currently
    outstanding, or approximately • % of our
    outstanding shares after this offering, are
    "restricted" under Rule 144 and are eligible for
    sale under the provisions of Rule 144. See "Shares
    Eligible for Future Resale."
Additionally, under our fiscal advisory agreement with the
    Canadian agents, we are obligated to issue to the Canadian
    agents at the closing of this offering, in payment of a fiscal
    advisory fee, that number of shares of our common stock equal
    to, depending on the gross proceeds of the offering, between
    1.0% and 2.0% of our common stock issued and outstanding
    immediately upon the closing of the offering. The shares issued
    to the Canadian agents under our the agreement will be subject
    to resale restrictions in accordance with applicable Canadian
    securities laws and will be subject to resale restrictions for a
    period of one year following the closing of the offering under
    the
lock-up
agreements described below.
After this offering and the expiration of the
lock-up
periods, the holders of an aggregate of 31,764,437 shares
    of our common stock will have rights, subject to some
    conditions, to require us to include their shares in
    registration statements that we may file for ourselves or other
    stockholders. We also intend to register for resale all shares
    of common stock that we have issued and may issue under our
    option plans. Once we register these shares, subject to any
lock-up
restrictions, if any, they can be freely sold in the public
    market. Furthermore, our agents may, at their discretion and at
    any time without notice, release all or any portion of the
    securities from the restrictions on sale imposed by
lock-up
agreements. Due to these factors, sales of a substantial number
    of shares of our common stock in the public market could occur
    at any time. These sales, or the perception in the market that
    the holders of a large number of shares are able to or intend to
    sell shares, could reduce the market price of our common stock.
    See "Dilution."
The
    market price of our common stock may be highly volatile 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 our
    securities. We have applied for listing on the
TSX-V
of the
    shares of our common stock included in the units offered under
    this prospectus and the shares of our common stock issuable upon
    exercise of the warrants included in the units offered under
    this prospectus. An active trading market for our common stock
    may not develop following this offering. You may not be able to
    sell your shares quickly or at the market price if trading in
    our common stock is not active.
The market for our common stock will likely be characterized by
    significant price volatility when compared to more established
    issuers and we expect that it will continue to be so for the
    foreseeable future. The market price of our common stock is
    likely to be volatile for a number of reasons. First, our common
    stock is likely to be sporadically
and/or
thinly traded. As a consequence of this lack of liquidity, the
    trading of relatively small quantities of common stock by our
    stockholders may disproportionately influence the price of the
    common stock in either direction. The
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price of the common stock could, for example, decline
    precipitously if even a relatively small number of shares are
    sold on the market without commensurate demand, as compared to a
    market for shares of an established issuer which could better
    absorb those sales without adverse impact on its share price.
    Secondly, we are a speculative or "risky" investment
    due to our small amount of sales and lack of profits to date and
    uncertainty of future market acceptance for our current and
    potential products or engineering services. As a consequence of
    this enhanced risk, more risk-adverse investors may, under the
    fear of losing all or most of their investment in the event of
    negative news or lack of progress, be more inclined to sell
    their shares on the market more quickly and at greater discounts
    than would be the case with the shares of an established issuer.
    We cannot make any predictions or projections as to what the
    prevailing market price for the common stock will be at any time
    or as to what effect the sale of common stock or the
    availability of common stock for sale at any time will have on
    the prevailing market price.
Purchasers
    of our units will experience immediate and substantial dilution
    as a result of their common stock being worth less on a net
    tangible book value basis than the amount they
    invested.
The price that will be paid by investors in this offering for
    our units will be significantly higher than the net tangible
    book value per share of our common stock. Purchasers of our
    units will experience immediate and substantial dilution of
    $ •  assuming that all of the units offered under
    this prospectus are sold. In addition, a majority of our
    outstanding options, warrants, convertible debt and convertible
    preferred stock may be exercised for or converted into shares of
    our common stock at prices that are below the expected purchase
    price paid by investors in this offering. In connection with
    this offering, we will issue warrants as part of the units and
    agent options exercisable to purchase that number of shares of
    our common stock and warrants equal to 12.5% of the aggregate
    number of shares of our common stock and warrants sold under the
    offering (including the shares and warrants issued upon exercise
    of the over-allotment option), at the initial public offering
    price per share and warrant, for a period of 12 months from
    the closing date. To the extent that these outstanding options,
    warrants, convertible debt or convertible preferred stock are
    exercised or converted, there may be further dilution to
    investors. In addition, under our fiscal advisory agreement with
    the Canadian agents, we are obligated to issue to the Canadian
    agents at the closing of this offering, in payment of a fiscal
    advisory fee, that number of shares of our common stock equal
    to, depending on the gross proceeds of the offering, between
    1.0% and 2.0% of our common stock issued and outstanding
    immediately upon the closing of the offering, which will further
    dilute investors. Accordingly, in the event we are liquidated,
    investors may not receive the full amount of their investment.
    See "Dilution."
Our
    management owns a significant percentage of our outstanding
    common stock. If the ownership of our common stock continues to
    be highly concentrated in management, it may prevent other
    stockholders from influencing significant corporate
    decisions.
Our officers and directors currently own approximately 38% of
    the outstanding shares of our common stock. Following the
    completion of this offering (and assuming that all units offered
    under this prospectus are sold), our executive officers and
    directors will own approximately • % of the
    outstanding shares of our common stock. As a result, our
    management will exercise significant control over matters
    requiring stockholder approval, including the election of our
    board of directors, the approval of mergers and other
    extraordinary transactions, as well as the terms of any of these
    transactions. This concentration of ownership could have the
    effect of delaying or preventing a change in our control or
    otherwise discouraging a potential acquirer from attempting to
    obtain control of us, which could in turn have an adverse effect
    on the fair market value of our company and our common stock.
    The interests of these and other of our existing stockholders
    may conflict with the interests of our other stockholders.
Management
    will have broad discretion as to the use of the proceeds from
    this offering, and may use the proceeds for purposes different
    from their current intent or not utilize the proceeds
    effectively.
While we intend to use the net proceeds of this offering to fund
    capital expenditures and research and development, repay bank
    and certain other borrowings, and for general corporate
    purposes, including working capital, we will have broad
    discretion to adjust the application and allocation of the net
    proceeds in order to address changed circumstances and
    opportunities. The success of our operations that are influenced
    by capital expenditures, research and development and working
    capital allocations will be substantially dependent upon the
    discretion and judgment of our management with respect to the
    application and allocation of the net proceeds of this offering.
    Our management will have broad
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discretion as to the application of the net proceeds and could
    use them for purposes other than those contemplated at the time
    of this offering. Moreover, our management may use the net
    proceeds for corporate purposes that may not lead to
    profitability or increase the fair market value of our company
    or our common stock.
It may
    be difficult for us to attract or retain qualified officers and
    directors, which could adversely affect our
    business.
As a public company, the Sarbanes-Oxley Act of 2002
    (Sarbanes-Oxley) and the related rules and regulations of the
    SEC, as well as the rules and regulations of applicable Canadian
    securities regulators and the rules of the
TSX-V
(if our listing application is accepted), will require us
    to implement additional corporate governance practices and
    adhere to a variety of reporting requirements and complex
    accounting rules. Among other things, we will be subject to
    rules regarding the independence of the members of our board of
    directors and committees of the board and their experience in
    finance and accounting matters and certain of our executive
    officers will be required to provide certifications in
    connection with our quarterly and annual reports filed with the
    SEC and applicable Canadian securities regulators. The perceived
    increased personal risk associated with these rules may deter
    qualified individuals from accepting these positions.
    Accordingly, we may be unable to attract and retain qualified
    officers and directors. If we are unable to attract and retain
    qualified officers and directors, our business and our ability
    to obtain or maintain the listing of our shares of common stock
    on a stock exchange could be adversely affected.
If we
    fail to implement and maintain an effective system of internal
    controls, we may not be able to accurately report our financial
    results or prevent fraud and may fail to comply with SEC rules
    and the rules and regulations of applicable Canadian securities
    regulators.
We must implement and maintain effective internal financial
    controls for us to provide reliable and accurate financial
    reports and effectively prevent fraud. Implementation and
    maintenance of effective internal financial controls will depend
    on the effectiveness of our financial reporting and data systems
    and controls. We expect these systems and controls to become
    increasingly complex to the extent that our business grows. To
    effectively manage this growth, we will need to continue to
    improve our operational, financial and management controls and
    our reporting systems and procedures. We cannot be certain that
    these measures will ensure that we design, implement and
    maintain adequate controls over our financial processes and
    reporting in the future. Any failure to implement required new
    or improved controls, or difficulties encountered in their
    implementation or operation, could harm our operating results or
    cause us to fail to meet our financial reporting obligations.
    Inferior internal controls could also cause investors to lose
    confidence in our reported financial information, which could
    have a negative effect on the market price of our common stock
    and our access to capital.
Rules adopted by the SEC pursuant to Section 404 of
    Sarbanes-Oxley require annual assessment of our internal control
    over financial reporting, and attestation of this assessment by
    our independent registered public accountants. Under the SEC
    rules currently in effect, both the management assessment of our
    internal control over financial reporting and the attestation of
    management's assessment by our independent registered
    public accountants will first apply to our annual report for the
    2009 fiscal year. The standards governing management's
    assessment of internal control over financial reporting are new
    and complex, and require significant documentation, testing and
    possible remediation to meet the detailed standards. In
    addition, the attestation process by our independent registered
    public accountants is new and we may encounter problems or
    delays in completing the implementation of any requested
    improvements and receiving an attestation of our assessment by
    our independent registered public accountants. If we cannot
    assess our internal control over financial reporting as
    effective, or our independent registered public accountants are
    unable to provide an unqualified attestation report on such
    assessment, investors could lose confidence in our reported
    financial information, which could have a negative effect on the
    market price of our common stock and our access to capital.
In addition, management's assessment of internal controls
    over financial reporting may identify weaknesses and conditions
    that need to be addressed in our internal controls over
    financial reporting or other matters that may raise concerns for
    investors. Any actual or perceived weaknesses and conditions
    that need to be addressed in our internal control over financial
    reporting, disclosure of management's assessment of our
    internal controls over financial reporting, or disclosure of our
    independent registered public accounting firm's attestation
    to our report on management's assessment of our internal
    controls over financial reporting may have a negative effect on
    the market price of our common stock and our access to capital.
21
Table of Contents
We
    will incur significant increased costs as a result of operating
    as a public company, and our management will be required to
    devote substantial time to new compliance
    initiatives.
As a public company, we will incur significant legal, accounting
    and other expenses that we did not incur as a private company.
    In addition, Sarbanes-Oxley and the related rules and
    regulations of the SEC, as well as the rules and regulations of
    applicable Canadian securities regulators and the rules of the
TSX-V
(if
    our listing application is accepted), impose various
    requirements on public companies, including requiring changes in
    corporate governance practices. Our management and other
    personnel will need to devote a substantial amount of time to
    these compliance initiatives. Moreover, these rules and
    regulations will increase our legal and financial compliance
    costs and will make some activities more time-consuming and
    costly. For example, we expect these new rules and regulations
    to make it more difficult and more expensive for us to obtain
    director and officer liability insurance, and we may be required
    to incur substantial costs to maintain the same or similar
    coverage. Compliance with Section 404 of Sarbanes-Oxley
    will also require that we incur substantial accounting expenses
    and expend significant management efforts.
Our
    common stock may be considered a "penny stock," and
    thereby be subject to additional sale and trading regulations
    that may make it more difficult to sell.
Our common stock, which is not currently listed or quoted on any
    national securities exchange or national quotation system, may
    be considered to be a "penny stock" if it does not
    qualify for one of the exemptions from the definition of
    "penny stock" under
Rule 3a51-1
under the Securities Exchange Act of 1934 (Exchange Act). Our
    common stock may be a "penny stock" if it meets one or
    more of the following conditions (i) the stock trades at a
    price less than $5.00 per share; (ii) it is not traded on a
    "recognized" national exchange; (iii) it is not
    quoted on the NASDAQ Capital Market, or even if so, has a price
    less than $5.00 per share; or (iv) is issued by a company
    that has been in business less than three years with net
    tangible assets less than $5 million.
The principal result or effect of being designated a "penny
    stock" is that US securities broker-dealers participating
    in sales of our common stock will be subject to the "penny
    stock" regulations set forth in
Rules 15g-2
through
15g-9
promulgated under the Exchange Act. For example,
Rule 15g-2
requires broker-dealers dealing in penny stocks to provide
    potential investors with a document disclosing the risks of
    penny stocks and to obtain a manually signed and dated written
    receipt of the document at least two business days before
    effecting any transaction in a penny stock for the
    investor's account. Moreover,
Rule 15g-9
requires broker-dealers in penny stocks to approve the account
    of any investor for transactions in such stocks before selling
    any penny stock to that investor. This procedure requires the
    broker-dealer to (i) obtain from the investor information
    concerning his or her financial situation, investment experience
    and investment objectives; (ii) reasonably determine, based
    on that information, that transactions in penny stocks are
    suitable for the investor and that the investor has sufficient
    knowledge and experience as to be reasonably capable of
    evaluating the risks of penny stock transactions;
    (iii) provide the investor with a written statement setting
    forth the basis on which the broker-dealer made the
    determination in (ii) above; and (iv) receive a signed
    and dated copy of such statement from the investor, confirming
    that it accurately reflects the investor's financial
    situation, investment experience and investment objectives.
    Compliance with these requirements may make it more difficult
    and time consuming for holders of our common stock to resell
    their shares to third parties or to otherwise dispose of them in
    the market or otherwise.
We do
    not intend to pay dividends on our common stock.
We have never declared or paid any cash dividends on our common
    stock. We currently intend to retain our future earnings, if
    any, to finance the operation and growth of our business and do
    not expect to pay any cash dividends.
Our
    certificate of incorporation, by-laws and Delaware law may
    discourage takeovers and business combinations that our
    stockholders might consider in their best
    interests.
Provisions in our certificate of incorporation and by-laws may
    delay, defer, prevent or render more difficult a takeover
    attempt that our stockholders might consider in their best
    interests. Even in the absence of a takeover attempt, the
    existence of these provisions may adversely affect the market
    value of our common stock if they are
22
Table of Contents
viewed as discouraging takeover attempts in the future. See
    "Description of Capital Stock" for additional
    information on the anti-takeover measures applicable to us.
Provisions in our restated certificate of incorporation and
    amended and restated bylaws, as well as provisions of Delaware
    law, could make it more difficult for a third party to acquire
    us, even if doing so would benefit our stockholders. Our
    certificate of incorporation and bylaws:
•
provide that the authorized number of directors may be changed
    only by resolution of the board of directors;
•
provide that all vacancies, including newly created
    directorships, may, except as otherwise required by law, be
    filled by the affirmative vote of a majority of directors then
    in office, even if such number is less than a quorum;
•
require that any action to be taken by our stockholders be
    effected at a duly called annual or special meeting of
    stockholders and not by written consent;
•
provide that stockholders seeking to present proposals before a
    meeting of stockholders or to nominate candidates for election
    as directors at a meeting of stockholders must provide notice in
    writing in a timely manner, and also specify requirements as to
    the form and content of a stockholder's notice;
•
do not provide for cumulative voting rights, therefore allowing
    the holders of a majority of the shares of our common stock
    entitled to vote in any election of directors to elect all of
    the directors standing for election, if they should so
    choose; and
•
provide that special meetings of our stockholders may be called
    only by the chairman of the board, our chief executive officer
    or by the board of directors pursuant to a resolution adopted by
    a majority of the total number of authorized directors.
The amendment of any of these provisions would require approval
    by the holders of at least
    66
2
/
3
%
    of our then outstanding capital stock.
In addition, we may become subject to Section 203 of the
    Delaware General Corporation Law, which generally prohibits a
    Delaware corporation from engaging in any of a broad range of
    business combinations with an interested stockholder for a
    period of three years following the date on which the
    stockholder became an interested stockholder. This provision
    could have the effect of delaying or preventing a change of
    control, whether or not it is desired by or beneficial to our
    stockholders.
We can
    issue other series of shares of preferred stock that may
    adversely affect your rights as a holder of our common stock or
    warrants.
As of the date of this prospectus, we are authorized to issue up
    to 6,745,681 shares of preferred stock. Prior to the time
    the registration statement of which this prospectus forms a part
    becomes effective, the number of shares of preferred stock we
    are authorized to issue will be reduced to 5,000,000 shares. The
    designations, rights and preferences of our preferred stock may
    be determined from time-to-time by our board of directors.
    Accordingly, our board of directors is empowered, without
    shareholder approval, to issue one or more series of preferred
    stock with dividend, liquidation, conversion, voting or other
    rights superior to those of the holders of our common stock. For
    example, an issuance of shares of preferred stock could:
•
adversely affect the voting power of the holders of our common
    stock;
•
make it more difficult for a third party to gain control of us;
•
discourage bids for our common stock;
•
limit or eliminate any payments that the holders of our common
    stock could expect to receive upon our liquidation; or
•
adversely affect the market price of our common stock.
168,500 shares of our Series C Preferred Stock were
    outstanding as of the date of this prospectus. We have agreed
    with the agents to use our best efforts to cause all of the
    outstanding shares of our Series C Preferred Stock,
    together with all dividends accrued and unpaid thereon, to be
    converted into common stock prior to the effective time of the
    registration statement of which this prospectus forms a part.
23
Table of Contents
We may
    need to raise additional funds.
Our operations to date have consumed substantial amounts of
    cash, and we expect our capital and operating expenditures to
    increase in the next few years. We believe that our existing
    capital resources and anticipated cash flow from planned
    operations, together with the net proceeds of this offering,
    should be adequate to satisfy our cash requirements for the next
    12 months. However, we may need significant additional
    capital before that time. Any additional required financing may
    not be available on acceptable terms or at all. If we raise
    additional funds by issuing equity securities or convertible
    debt securities, further dilution to existing stockholders may
    result. If adequate funds are not available, our business,
    financial condition and results of operations and the market
    price of our common stock would be materially adversely affected.
Adverse
    capital and credit market conditions may significantly affect
    our ability to meet liquidity needs, access to capital and cost
    of capital.
We have historically relied on private placements of equity and
    debt to fund our operating losses and capital expenditure. The
    capital and credit markets have been experiencing extreme
    volatility and disruption for more than 12 months.
    Disruptions, uncertainty or volatility in the capital and credit
    markets may limit our ability to access the capital necessary to
    operate and grow our business. Adverse capital and credit market
    conditions may force us to delay raising capital or bear an
    unattractive cost of capital which could significantly reduce
    our financial flexibility. Our results of operations, financial
    condition, cash flows and capital position and the market value
    of our common stock could be materially adversely affected by
    disruptions in the financial markets.
Our
    ability to utilize our net operating loss carryforwards and
    certain other tax attributes is limited.
As of March 31, 2009, we had net operating loss
    carryforwards of approximately $12.5 million for Federal
    and state income tax purposes. Under Section 382 of the
    Internal Revenue Code, if a corporation undergoes an
    "ownership change," the corporation's ability to
    use its pre-change net operating loss carryforwards and other
    pre-change tax attributes to offset its post-change income may
    be limited. An ownership change is defined for these purposes as
    a greater than 50% change in its equity ownership by value over
    a three-year period. We may also experience ownership changes in
    the future as a result of this offering or subsequent changes in
    our stock ownership.
FORWARD-LOOKING
    STATEMENTS
This prospectus contains, in addition to historical information,
    forward-looking statements. These statements are based on our
    management's beliefs and assumptions and on information
    currently available to our management. The forward-looking
    statements are contained principally under the headings
    "Prospectus Summary," "Risk Factors,"
    "Management's Discussion and Analysis of Financial
    Condition and Results of Operations," "Use of
    Proceeds" and "Business." Forward-looking
    statements include statements concerning:
•
our possible or assumed future results of operations;
•
our business strategies;
•
our ability to attract and retain customers;
•
our ability to sell additional products and services to
    customers;
•
our cash needs and financing plans;
•
our competitive position;
•
our industry environment;
•
our potential growth opportunities;
•
expected technological advances by us or by third parties and
    our ability to leverage them;
•
the effects of future regulation; and
•
the effects of competition.
24
Table of Contents
All statements in this prospectus that are not historical facts
    are forward-looking statements. We may, in some cases, use terms
    such as "anticipates," "believes,"
    "could," "estimates," "expects,"
    "intends," "may," "plans,"
    "potential," "predicts,"
    "projects," "should," "will,"
    "would" or similar expressions that convey uncertainty
    of future events or outcomes to identify forward-looking
    statements.
The outcome of the events described in these forward-looking
    statements are subject to known and unknown risks, uncertainties
    and other factors that may cause our actual results, performance
    or achievements to be materially different from any future
    results, performances or achievements expressed or implied by
    the forward-looking statements. These important factors include
    our financial performance and the other important factors we
    discuss in greater detail in "Risk Factors." You
    should read these factors and the other cautionary statements
    made in this prospectus as applying to all related
    forward-looking statements wherever they appear in this
    prospectus. Given these factors, you should not place undue
    reliance on these forward-looking statements. Also,
    forward-looking statements represent our management's
    beliefs and assumptions only as of the date on which the
    statements are made. We undertake no obligation to publicly
    update any forward-looking statements, whether as a result of
    new information, future events or otherwise, except as required
    by law. You should read this prospectus and the documents that
    we reference in this prospectus and have filed as exhibits to
    the registration statement, of which this prospectus is a part,
    completely and with the understanding that our actual future
    results may be materially different from what we currently
    expect.
USE OF
    PROCEEDS
We estimate that the net proceeds of this offering will be
    approximately Cdn$ •  million, based upon an
    assumed initial public offering price of Cdn$ • 
    per unit, and after deducting estimated underwriting discounts
    and commissions and offering expenses. If the agents exercise
    their over-allotment option in full, we estimate that the net
    proceeds will be approximately Cdn$ •  million.
We plan to use $916,065 of our net proceeds from this offering
    to repay the outstanding principal amounts of and interest
    accrued on our lines of credit and notes payable, including
    $95,000 in principal amount plus interest payable to Paul J.
    Travers, our President and Chief Executive Officer, under a
    revolving loan agreement that we entered into with
    Mr. Travers in October 2008. We intend to use the remainder
    of the net proceeds from this offering for:
•
research and development expenses;
•
capital expenditures;
•
selling, marketing, general and administrative expenses;
•
possible acquisitions of businesses, technologies or other
    assets; and
•
general corporate purposes.
We intend to continue our development of new products that
    leverage our advancements in our optics and electronics
    technology. We believe that these new technologies, if
    successfully implemented, will result in significant performance
    improvements in our products and as a result increase our
    overall customer demand. We anticipate expending an aggregate of
    approximately $3.0 million on product design, development
    and tooling and our current development plans by product line
    are as follows:
Targeted
New Product Development Objectives
Completion Date
Wrap Video Eyewear (consumer)
Fall 2009
Blade Video Eyewear (consumer)
Spring 2010
Blade Tac-Eye (defense)
Summer 2010
Blade low vision-assist product
Fall 2010
Blade II display engine
Spring 2011
25
Table of Contents
To expand our manufacturing floor and our internal research and
    development equipment we intend to invest approximately $211,000
    over the next 18 months. And to support our overall growth
    we intend to invest approximately $166,000 in new computer
    hardware and software over the next 18 months.
To assist in the marketing of our new Wrap Video Eyewear
    products we intend to invest up to $780,000 in point of purchase
    (POP) display systems to show case our new products at retail
    outlets. We estimate that this amount would allow us place our
    POP display systems in approximately 1600 retail outlets.
Although we may use a portion of the net proceeds to acquire
    businesses, technologies or other assets, we have no agreements
    or arrangements with respect to any such transactions at the
    present time.
Notwithstanding the foregoing, we cannot specify with certainty
    the uses for the net proceeds to be received upon the completion
    of this offering. Our management will have broad discretion as
    to how to spend and invest approximately Cdn$ • 
    million of the net proceeds of this offering, and investors will
    be relying on the judgment of our management regarding the
    application of these proceeds. You will not have the opportunity
    to evaluate the economic, financial or other information on
    which we base our decisions on how to use these proceeds. The
    timing and amount of our actual expenditures will be based on
    many factors, including cash flows from operations, available
    technology advances and the growth of our business. The funds
    may not be fully used for a significant period following the
    closing of the offering. Pending the uses described above, we
    intend to invest the net proceeds from this offering in
    short-term, investment grade, interest bearing securities. We
    cannot predict whether the proceeds invested will yield a
    favorable return.
Although we intend to use the proceeds from the offering as set
    forth above, the actual amount that we spend in connection with
    each intended use of the proceeds may vary significantly from
    the amounts specified above and will be dependent on a number of
    factors, including those referenced under "Risk
    Factors".
We have agreed with Mr. Travers and Grant Russell, our
    Executive Vice President and Chief Financial Officer, that we
    will pay them deferred compensation in the aggregate amount of
    $445,096, plus interest at the annual rate of 8.0%, and $209,208
    in aggregate principal amount, plus interest at the annual rate
    of 8.0%, in repayment of loans made to us more than five years
    ago by those officers to finance our operations, either in one
    lump sum on or before the first anniversary of the closing of
    this offering from the proceeds of the exercise of the warrants
    included in the units and the agents' warrants if and when
    at least 50% of those warrants are exercised or otherwise in 12
    equal monthly installments beginning on the first anniversary of
    the closing of this offering until paid in full. Any additional
    proceeds from any exercise of the warrants included in the units
    and the agents' warrants will be used for working capital.
    If all of these warrants were to be exercised, we would receive
    additional funds totaling approximately Cdn$ • .
    These warrants may not be exercised before they
    expire •  months after the closing of this
    offering.
DIVIDEND
    POLICY
We have never declared or paid any cash dividends on our common
    stock. We currently intend to retain all available funds and any
    future earnings to support our operations and finance the growth
    and development of our business. We do not intend to pay cash
    dividends on our common or preferred stock for the foreseeable
    future. Any future determination related to dividend policy will
    be made at the discretion of our board of directors.
    Additionally, our lines of credit prohibit us from paying cash
    dividends at any time at which any amount remains outstanding
    under the lines. Although the outstanding principal amounts of
    and interest accrued on our lines of credit will be paid in full
    from the proceeds of this offering we expect that we will draw
    down on the lines of credit from time to time after this
    offering. We are not subject to any restrictions that would
    prevent us from paying a dividend except for the restrictions
    under our lines of credit and restrictions under
TSX-V
policies, our certificate of incorporation and bylaws and the
    Delaware General Corporation Law.
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Table of Contents
CAPITALIZATION
The following table sets forth our cash and cash equivalents and
    our capitalization as of March 31, 2009:
•
on an actual basis;
•
on a pro forma basis based on an assumed initial public offering
    price of Cdn$ •  per unit, to give effect to the
    conversion of (i) 168,500 shares of our Series C
    Preferred Stock outstanding immediately prior to the closing of
    this offering, together with all dividends accrued and unpaid
    thereon, at the conversion price of $0.2917 per share into
    7,060,914 shares of our common stock; and (ii) $75,000
    in aggregate principal amount of convertible promissory notes,
    together with all interest accrued and unpaid thereon, at the
    conversion price of $0.057089 per share into
    2,251,985 shares of our common stock; and
•
on a
pro forma
as adjusted basis to give effect to the
    events described above and the sale of • units in
    this offering at an assumed initial offering price of
    Cdn$ •  per unit, after deducting estimated
    underwriting discounts and commissions and offering expenses of
    Cdn$ •  million, and the issuance
    of •  shares of our common stock to the
    Canadian agents in payment of a fiscal advisory fee.
You should read the information in this table together with our
    consolidated financial statements and accompanying notes and
    "Management's Discussion and Analysis of Financial
    Condition and Results of Operations" appearing elsewhere in
    this prospectus.
March 31, 2009
Pro Forma
Actual
Pro Forma
As Adjusted
(Unaudited)
Cash and cash equivalents
$
259,151
Long-term debt (non-convertible) and related accrued interest
1,286,643
Accrued cumulative preferred dividends
349,574
Convertible promissory notes and bridge loans and related
    accrued interest
126,191
Total long-term obligations
1,762,408
Stockholders' Equity:
Preferred stock
Series C preferred stock ($0.001 par value),
    500,000 shares authorized and 168,500 shares issued
    and outstanding
169
Common Stock
Common stock ($0.001 par value), 400,000,000 shares
    authorized, 220,268,927 shares issued and outstanding,
    actual; •  shares issued and outstanding,
    pro forma as adjusted
220,269
Additional paid-in capital
13,039,100
Subscriptions receivable
(321,517
)
Accumulated deficit
(15,161,140
)
Total stockholders' equity (deficit)
(2,223,119
)
Total capitalization
$
(201,560
)
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Table of Contents
The number of shares of common stock to be outstanding
    immediately after this offering is based on the number of shares
    outstanding as of March 31, 2009 and an assumed offering
    of •  units at an initial public offering
    price of Cdn$ •  per unit, and excludes:
•
15,304,554 shares of our common stock issuable upon
    exercise of then outstanding options under our 2007 option plan,
    having a weighted average exercise price of $0.0999 per share;
•
30,000,000 shares of our common stock reserved for issuance
    upon exercise of options under our 2009 option plan, none of
    which had then been granted;
•
7,000,000 shares of our common stock reserved for issuance
    upon exercise of options under our 2009 directors option
    plan, none of which had then been granted; and
•
7,172,160 shares of our common stock issuable upon exercise
    of outstanding warrants, having a weighted average exercise
    price of $0.1815 per share.
In consideration of certain fiscal advisory services rendered by
    the Canadian agents to us pursuant to a fiscal advisory fee
    agreement between us and the Canadian agents, we have agreed to
    issue to the Canadian agents at the closing of this offering, in
    payment of a fiscal advisory fee, that number of shares of our
    common stock equal to, depending on the gross proceeds of the
    offering, between 1.0% and 2.0% of our common stock issued and
    outstanding immediately upon the closing of the offering. The
    issuance of these shares to the Canadian agents is not covered
    by this prospectus. These shares will be issued pursuant to
    exemptions from the registration requirements of applicable
    United States and Canadian securities laws and subject to resale
    restrictions under those laws and a
lock-up
agreement for one year. See "Underwriting —
    Fiscal Advisory Fee Agreement."
Consolidated
    Capitalization
Except as disclosed in the table above, there have been no
    material changes in our share and loan capital since
    December 31, 2008.
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DILUTION
If you invest in our units in this offering, your ownership
    interest will be diluted to the extent of the difference between
    the initial public offering price per unit and the pro forma net
    tangible book value per share of our common stock after this
    offering. The historical net tangible book value of our common
    stock as of March 31, 2009 was a deficit of approximately
    $ •  million, or $( • ) per share,
    based on the number of shares outstanding as of March 31,
    2009. Historical net tangible book value per share is determined
    by dividing the number of outstanding shares of our common stock
    into our total tangible assets, or total assets less intangible
    assets, less our total liabilities and less the carrying value
    of our total convertible preferred stock. Investors
    participating in this offering will incur immediate, substantial
    dilution. Our pro forma net tangible book value as of
    March 31, 2009 was a deficit of approximately
    $ •  million, or approximately
    $( • ) per share. Pro forma net tangible book
    value per share represents the amount of our total tangible
    assets less our total liabilities, divided by the pro forma
    number of shares of our common stock outstanding after giving
    effect to the conversion of all outstanding shares of our
    Series C Preferred Stock, together with all dividends
    accrued and unpaid thereon, into 7,060,914 shares of our
    common stock and $75,000 in aggregate principal amount of
    convertible promissory notes, together with all interest accrued
    and unpaid thereon, into 2,251,985 shares of our common
    stock upon completion of this offering. After giving effect to
    the sale of •  units in this offering at an
    assumed initial public offering price of Cdn$ • 
    per unit, and after deducting estimated underwriting discounts
    and commissions and offering expenses and the repayment of
    $ • million of outstanding notes payable, along
    with accrued interest, and the issuance
    of •  shares of our common stock to the
    Canadian agents in payment of a fiscal advisory fee, our pro
    forma as adjusted net tangible book value as of March 31,
    2009 would have been approximately
    $      million, or approximately
    $ •  per share of common stock. This represents
    an immediate increase in pro forma as adjusted net tangible book
    value of $ •  per share to existing stockholders,
    and an immediate dilution of Cdn$ •  share to
    investors participating in this offering. The following table
    illustrates this per share dilution:
Assumed initial public offering price per unit
$
Historical net tangible book value per share as of
    March 31, 2009
(0.0210
)
Increase in net tangible book value deficit per share
    attributable to conversion of preferred stock and convertible
    notes
0.0076
Pro forma net tangible book value deficit per share as of
    March 31, 2009
•
Increase in net tangible book value per share attributable to
    investors participating in this offering
•
Pro forma as adjusted net tangible book value per share after
    this offering
Pro forma dilution per share to investors participating in this
    offering
•
The following table summarizes, on a pro forma as adjusted basis
    as of March 31, 2009, the differences between the number of
    shares of common stock purchased from us, the total
    consideration and the average price per share paid by existing
    stockholders and by investors participating in this offering,
    before deducting estimated underwriting discounts and
    commissions and offering expenses, at an assumed initial public
    offering price of Cdn$ •  per unit:
Shares Purchased
Total Consideration
Average Price
Number
Percent
Amount
Percent
per Share
Existing stockholders before this offering
220,268,927
•
%
$
12,897,165
%
$
0.0585
Investors participating in this offering
•
•
%
Total
•
100
%
The discussion and tables above assume no exercise of the
    over-allotment option, the agents' warrants or any other
    options or warrants outstanding on the date of this prospectus.
    If the overallotment option and the agents' warrants are
    exercised in full, the number of shares of common stock held by
    existing stockholders will be reduced to • % of
    the total number of shares of common stock to be outstanding
    after this offering, and the number of
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Table of Contents
shares of common stock held by investors participating in this
    offering will be increased to • shares
    or • % of the total number of shares of common
    stock outstanding after this offering.
In consideration of certain fiscal advisory services rendered by
    the Canadian agents to us pursuant to a fiscal advisory fee
    agreement between us and the Canadian agents, we have agreed to
    issue to the Canadian agents at the closing of this offering, in
    payment of a fiscal advisory fee, that number of shares of our
    common stock equal to, depending on the gross proceeds of the
    offering, between 1.0% and 2.0% of our common stock issued and
    outstanding immediately upon the closing of the offering. The
    issuance of these shares to the Canadian agents is not covered
    by this prospectus.  These shares will be issued pursuant to
    exemptions from the registration requirements of applicable
    United States and Canadian securities laws and subject to resale
    restrictions under these laws and a
lock-up
agreement for one year. See "Underwriting —
    Fiscal Advisory Fee Agreement."
The share data in the table above is based on the number of
    shares outstanding as of March 31, 2009 and an assumed
    offering of •  units at an initial public
    offering price of $ •  per unit, and excludes:
•
15,304,554 shares of our common stock issuable upon
    exercise of options then outstanding under our 2007 option plan,
    having a weighted average exercise price of $0.0883 per share;
•
30,000,000 shares of our common stock reserved for issuance
    upon exercise of options under our 2009 option plan, none of
    which had then been granted;
•
7,000,000 shares of our common stock reserved for issuance
    upon exercise of options under our 2009 directors'
    option plan, none of which had then been granted; and
•
7,172,160 shares of common stock issuable upon exercise of
    then outstanding warrants, having a weighted average exercise
    price of $0.1815 per share.
To the extent that any of these options or warrants are
    exercised, new options are issued under our equity incentive
    plans or we issue additional shares of common stock in the
    future, there will be further dilution to investors
    participating in this offering.
Quantitative
    and Qualitative Disclosures about Market Risk
Foreign
    Currency Exchange Risk
In 2008, approximately 85% of our total sales were comprised of
    sales to customers in the United States and 15% were comprised
    of sales to customers outside the United States. Of our sales
    received in 2008 from customers outside of the United States,
    95% were paid in currencies other than US dollars. Therefore,
    our results could be negatively affected by such factors as
    changes in foreign currency exchange rates, trade protection
    measures and changes in regional or worldwide economic or
    political conditions. We also buy many components manufactured
    in other countries in transactions denominated in US dollars.
    The domestic currencies of some of those suppliers fluctuate
    with the US dollar. As a result, changes in the cost of our
    components can occur with each new purchase. A decrease in the
    value of the US dollar against our supplier's domestic
    currencies could negatively and materially affect our
    manufacturing costs. A 10% change in the value of the US dollar
    relative to each of the foreign currencies in which our sales
    are denominated would have resulted in a change in our sales of
    no more than 2%. Historically, we have not tried to reduce our
    exposure to exchange rate fluctuations by engaging in hedging
    activities.
Interest
    Rate Risk
At December 31, 2008, we had unrestricted cash and cash
    equivalents totaling $818,719, and at December 31, 2007 we
    had unrestricted cash and cash equivalents totaling $364,856.
    These amounts were not held in interest-bearing accounts. The
    unrestricted cash and cash equivalents were held for working
    capital purposes. We do not enter into investments for trading
    or speculative purposes. The interest rates on our $879,208 of
    notes payable outstanding at December 31, 2008 are fixed at
    a range of between 7.5% and 12.0% and a weighted average range
    of approximately 10%. If market interest rates increase,
    the fair value of our notes payable would decrease.
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Recent
    Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board
    (FASB) issued Statement of Financial Accounting Standard (SFAS)
    No. 141(R),
Business Combinations
, a revision to
    SFAS No. 141,
Business Combinations
(SFAS No. 141(R)). SFAS No. 141(R)
    provides revised guidance for recognition and measurement of
    identifiable assets and goodwill acquired, liabilities assumed
    and any non-controlling interest in the acquiree at fair value.
    The statement also establishes disclosure requirements to enable
    the evaluation of the nature and financial effects of a business
    combination. SFAS No. 141(R) is required to be applied
    prospectively to business combinations for which the acquisition
    date is on or after January 1, 2009. The impact of the
    adoption of SFAS 141(R) on our consolidated financial
    position and results of operations for the first quarter of 2009
    did not have a material effect on our consolidated financial
    statements. Any subsequent impact will be dependent on the size
    and nature of business combinations, if any, completed in the
    future.
In December 2007, the FASB issued SFAS No. 160,
Non-controlling Interests in Consolidated Financial
    Statements — an amendment of ARB No. 51
(SFAS No. 160). This statement establishes
    accounting and reporting standards for ownership interests in
    subsidiaries held by parties other than the parent.
    Specifically, SFAS No. 160 requires the presentation
    of non-controlling interests as equity in the Consolidated
    Balance Sheets, and separate identification and presentation in
    the Consolidated Statements of Income of net income attributable
    to the entity and the non-controlling interest. It also
    establishes accounting and reporting standards regarding
    deconsolidation and changes in a parent's ownership
    interest. SFAS No. 160 is effective as of
    January 1, 2009. The provisions of SFAS No. 160
    are generally required to be applied prospectively, except for
    the presentation and disclosure requirements, which must be
    applied retrospectively. The adoption of SFAS No. 160
    did not have a material effect on our consolidated financial
    statements.
In February 2008, the FASB issued FASB Staff Position (FSP)
No. FAS 157-2,
Effective Date of SFAS No. 157
. This FSP delays
    the effective date of SFAS No. 157 for all
    non-financial assets and non-financial liabilities, except those
    that are recognized or disclosed at fair value in the
    consolidated financial statements on a recurring basis (at least
    annually). This FSP partially deferred the effective date of
    SFAS No. 157 to fiscal years beginning after
    November 15, 2008, and interim periods within those fiscal
    years for items within the scope of this FSP. We adopted this
    FSP in the first quarter of fiscal year 2009, and did not have a
    material impact on our consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging
    Activities, an amendment of FASB Statement No. 133
(SFAS No. 161). This statement enhances the disclosure
    requirements related to derivative instruments and hedging
    activity to improve the transparency of financial reporting, and
    is effective for fiscal years and interim periods beginning
    after November 15, 2008. The adoption of
    SFAS No. 161 did not have a material effect on our
    consolidated financial statements.
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SELECTED
    FINANCIAL AND OTHER DATA
The following tables present our summary financial data and
    should be read together with our financial statements and
    accompanying notes and "Management's Discussion and
    Analysis of Financial Condition and Results of Operations"
    appearing elsewhere in this prospectus. The summary financial
    data for the years ended December 31, 2008, 2007 and 2006
    are derived from our audited annual financial statements, which
    are included elsewhere in this prospectus. The unaudited summary
    financial data as of March 31, 2009 and for the three
    months ended March 31, 2009 and 2008 have been derived from
    our unaudited interim financial statements, which are included
    elsewhere in this prospectus, and include all adjustments,
    consisting of normal recurring adjustments, necessary for a fair
    presentation of our financial position and results of operations
    for these periods.
Year Ended December 31,
Three Months Ended March 31,
Statement of Operations Data
2008
2007
2006
2009
2008
(Unaudited)
(Unaudited)
Sales
$
12,564,487
$
10,146,379
$
9,538,308
$
3,043,994
$
1,720,914
Cost of Sales
8,863,508
6,783,473
5,767,550
1,856,683
1,487,349
Gross Margin
3,700,979
3,362,906
3,770,758
1,187,311
233,565
Operating Expenses
Research and development
3,366,518
2,365,412
1,279,239
502,011
736,716
Selling and marketing
2,128,625
1,920,164
1,191,800
449,266
449,562
General and administrative
2,299,685
1,718,627
1,560,278
478,253
533,799
Depreciation and amortization
510,133
374,078
276,989
138,834
123,696
Total operating expenses
8,304,961
6,378,281
4,308,306
1,568,364
1,843,773
Profit (Loss) from operations
(4,603,982
)
(3,015,375
)
(537,548
)
(381,053
)
(1,610,208
)
Interest and other income (expense)
188
2,549
313
—
—
Foreign exchange (loss) gain
(24,216
)
—
—
(1,272
)
366
Interest expense
(260,977
)
(241,692
)
(179,019
)
(65,376
)
(41,600
)
Legal settlement
—
96,632
—
—
—
Tax (expense) benefit
(5,212
)
98,372
(3,700
)
(888
)
(753
)
Total tax and other income (expense)
(290,217
)
(44,139
)
(182,406
)
(67,536
)
(41,987
)
Net (Loss)
$
(4,894,199
)
$
(3,059,514
)
$
(719,954
)
$
(448,589
)
$
(1,652,195
)
Income (loss) per share:
Basic and fully diluted*
$
(0.0229
)
$
(0.0160
)
$
(0.0047
)
$
(0.0022
)
$
(0.0084
)
Weighted average common shares outstanding:
Basic and fully diluted*
218,268,927
197,973,139
173,268,048
220,268,927
200,424,027
*
All outstanding warrants, options, and convertible debt are
    anti-dilutive, therefore basic and diluted earnings per share
    are the same for all periods.
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Year Ended December 31,
Three Months Ended March 31,
Cash Flow Data
2008
2007
2006
2009
2008
(Unaudited)
(Unaudited)
Cash flows provided by (used in) operating activities
$
(1,285,449
)
$
(3,295,900
)
$
120,053
$
(761,919
)
$
(208,047
)
Cash flows (used in) investing activities
(549,804
)
(316,743
)
(479,236
)
(60,208
)
(164,927
)
Cash flows provided by financing activities
2,289,116
3,408,328
874,569
262,559
77,652
As of December 31,
As of March 31,
Balance Sheet Data
2008
2007
2006
2009
2008
(Unaudited)
(Unaudited)
Cash and cash equivalents
$
818,719
$
364,856
$
569,171
$
259,151
$
69,534
Working Capital (deficiency)
(1,846,289
)
966,658
69,766
(1,892,747
)
(651,720
)
Total Assets
6,221,897
6,967,254
5,013,263
5,277,583
5,316,225
Long-Term Liabilities
1,754,379
2,014,476
1,980,476
1,762,408
2,015,453
Accumulated (deficit)
(14,687,276
)
(9,691,977
)
(6,531,363
)
(15,161,140
)
(11,369,383
)
Total Stockholders' equity (deficit)
(2,089,942
)
423,236
(603,954
)
(2,223,119
)
(1,190,888
)
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MANAGEMENT'S
    DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of
    financial condition and results of operations in conjunction
    with the "Selected Financial and Other Data" and our
    financial statements and related notes appearing elsewhere in
    this prospectus. In addition to historical information, the
    following discussion and analysis includes forward looking
    statements that involve risks, uncertainties and assumptions.
    Our actual results and the timing of events could differ
    materially from those anticipated in these forward looking
    statements as a result of a variety of factors, including those
    discussed in "Risk Factors" and elsewhere in this
    prospectus. See the discussion under "Forward Looking
    Statements" beginning on page 24 of this
    prospectus.
Overview
We are engaged in the design, manufacture, marketing and sale of
    devices that are worn like eyeglasses and feature built-in video
    screens that enable the user to view video and digital content,
    such as movies, computer data, the Internet or video games. Our
    products (known commercially as Video Eyewear, but also commonly
    referred to as virtual displays, wearable displays, personal
    viewers, head mounted displays, or near-to-eye displays) are
    used to view high-resolution video and digital information
    primarily from mobile electronic devices (such as cell phones,
    portable media players, gaming systems and laptop computers) and
    from desktop computers. Our products provide the user a viewing
    experience that simulates viewing a large screen television or a
    desktop computer monitor.
Our Video Eyewear products feature high performance miniature
    display modules, low power electronics and related optical
    systems. We produce both monocular and binocular Video Eyewear
    devices that we believe are excellent solutions for many mobile
    computer or video viewing requirements. We focus on two markets:
    the consumer markets for gaming and mobile video and rugged
    mobile displays for defense and industrial applications. We also
    offer low-vision assist Video Eyewear products that are designed
    to assist and improve the remaining vision of many people
    suffering from macular degeneration.
Since our inception in 1997, we have derived the majority of our
    sales from fees paid to us under research and development
    contracts and related volume manufacturing services primarily of
    night vision display electronics as a sub-contractor to defense
    suppliers to the US government. Since 2005, we have devoted
    significant resources to the development and commercial launch
    of our industrial and consumer products. During 2008 and 2007,
    we derived 35.4% and 32.4%, respectively, of our sales from our
    consumer Video Eyewear products.
We believe our intellectual property portfolio gives us a
    leadership position in microdisplay electronics, ergonomics,
    packaging, motion tracking and optical systems.
Critical
    Accounting Policies and Significant Developments and
    Estimates
The discussion and analysis of our financial condition and
    results of operations are based on our financial statements and
    related notes appearing elsewhere in this prospectus. The
    preparation of these statements in conformity with generally
    accepted accounting principles requires the appropriate
    application of certain accounting policies, many of which
    require us to make estimates and assumptions about future events
    and their impact on amounts reported in our financial
    statements, including the statement of operations, balance
    sheet, cash flow and related notes. Since future events and
    their impact cannot be determined with certainty, the actual
    results will inevitably differ from our estimates. Such
    differences could be material to the financial statements.
We believe that our application of accounting policies, and the
    estimates inherently required therein, are reasonable. These
    accounting policies and estimates are periodically reevaluated,
    and adjustments are made when facts and circumstances dictate a
    change. Historically, we have found our application of
    accounting policies to be appropriate, and actual results have
    not differed materially from those determined using necessary
    estimates.
Our accounting policies are more fully described in the notes to
    our financial statements included in this prospectus. In reading
    our financial statements, you should be aware of the factors and
    trends that our management
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believes are important in understanding our financial
    performance. The critical accounting policies, judgments and
    estimates that we believe have the most significant effect on
    our financial statements are:
•
valuation of inventories;
•
carrying value of long-lived assets;
•
valuation of intangible assets;
•
revenue recognition;
•
product warranty;
•
stock-based compensation; and
•
income taxes.
Valuation
    of Inventories
Inventory is stated at the lower of cost or market, with cost
    determined on a
first-in,
first-out method. Inventory includes purchased parts and
    components, work in process and finished goods. Provisions for
    excess, obsolete or slow moving inventory are recorded after
    periodic evaluation of historical sales, current economic
    trends, forecasted sales, estimated product lifecycles and
    estimated inventory levels. Purchasing practices, electronic
    component obsolescence, accuracy of sales and production
    forecasts, introduction of new products, product lifecycles,
    product support and foreign regulations governing hazardous
    materials are the factors that contribute to inventory valuation
    risks. Exposure to inventory valuation risks is managed by
    maintaining safety stocks, minimum purchase lots, managing
    product and end-of-life issues brought on by aging components or
    new product introductions, and by utilizing certain inventory
    minimization strategies such as vendor-managed inventories. The
    accounting estimate related to valuation of inventories is
    considered a "critical accounting estimate" because it
    is susceptible to changes from period-to-period due to the
    requirement for management to make estimates relative to each of
    the underlying factors, ranging from purchasing, to sales, to
    production, to after-sale support. If actual demand, market
    conditions or product lifecycles differ from estimates,
    inventory adjustments to lower market values would result in a
    reduction to the carrying value of inventory, an increase in
    inventory write-offs and a decrease to gross margins.
Carrying
    Value of Long-Lived Assets
If facts and circumstances indicate that a long-lived asset,
    including a products' mold tooling and equipment, may be
    impaired, the carrying value is reviewed. If this review
    indicates that the carrying value of the asset will not be
    recovered as determined based on projected undiscounted cash
    flows related to the asset over its remaining life, the carrying
    value of the asset is reduced to its estimated fair value. To
    date, no impairment on long-lived assets has been booked.
    Impairment losses in the future will be dependent on a number of
    factors such as general economic trends and major technology
    advances, and thus could be significantly different than
    historical results.
Valuation
    of Intangible Assets
We perform a valuation of intangible assets when events or
    circumstances indicate their carrying amounts may be
    unrecoverable. We have not impaired the value of certain
    intellectual property, such as patents and trademarks, which
    were valued (net of accumulated amortization) at $710,176 as of
    March 31, 2009, because management believes that its value
    is recoverable.
Revenue
    Recognition
Revenue from product sales is recognized in accordance with the
    SEC Staff Accounting Bulletin No. 104,
Revenue
    Recognition
. Product sales represent the majority of our
    revenue. We recognize revenue from these product sales when
    persuasive evidence of an arrangement exists, delivery has
    occurred or services have been provided, the sale price is fixed
    or determinable, and collectability is reasonably assured.
    Additionally, we sell our products on terms which transfer title
    and risk of loss at a specified location, typically shipping
    point. Accordingly, revenue
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Table of Contents
recognition from product sales occurs when all factors are met,
    including transfer of title and risk of loss, which typically
    occurs upon shipment by us. If these conditions are not met, we
    will defer the revenue recognition until such time as these
    conditions have been satisfied. We collect and remit sales taxes
    in certain jurisdictions and report revenue net of any
    associated sales taxes. We also sell certain products through
    distributors who are granted limited rights of return for stock
    balancing against purchases made within a prior 90 day
    period, including price adjustments downwards on any existing
    inventory. The provision for product returns and price
    adjustments is assessed for adequacy both at the time of sale
    and at each quarter end and is based on recent historical
    experience and known customer claims.
Revenue from any engineering consulting and other services is
    recognized at the time the services are rendered. For our
    longer-term development contracts, which to date have all been
    firm, fixed-priced contracts, we recognize revenue on the
    percentage-of-completion method. Under this method income is
    recognized as work on contracts progresses, but estimated losses
    on contracts in progress are charged to operations immediately.
    To date, all of our longer-term development contracts have been
    less than one calendar year in duration. We generally submit
    invoices for our work under these contracts on a monthly basis.
    The percentage-of-completion is determined using the
    cost-to-cost method.
The accounting estimate related to revenue recognition is
    considered a "critical accounting estimate" because
    terms of sale can vary, and judgment is exercised in determining
    whether to defer revenue recognition. Such judgments may
    materially affect net sales for any period. Judgment is
    exercised within the parameters of GAAP in determining when
    contractual obligations are met, title and risk of loss are
    transferred, sales price is fixed or determinable and
    collectability is reasonable assured.
Product
    Warranty
Warranty obligations are generally incurred in connection with
    the sale of our products. The warranty period for these products
    is generally one year, but can be 24 months in certain
    countries if required by law, such as in Europe. Warranty costs
    are accrued, to the extent that they are not recoverable from
    third party manufacturers, for the estimated cost to repair or
    replace products for the balance of the warranty periods. We
    provide for the costs of expected future warranty claims at the
    time of product shipment or over-builds to cover replacements.
    The adequacy of the provision is assessed at each quarter end
    and is based on historical experience of warranty claims and
    costs. The costs incurred to provide for these warranty
    obligations are estimated and recorded as an accrued liability
    at the time of sale. Future warranty costs are estimated based
    on historical performance rates and related costs to repair
    given products. The accounting estimate related to product
    warranty is considered a "critical accounting
    estimate" because judgment is exercised in determining
    future estimated warranty costs. Should actual performance rates
    or repair costs differ from estimates, revision to the estimated
    warranty liability would be required.
Stock-Based
    Compensation
Our board of directors approves grants of stock options to
    employees to purchase our common stock. Under
    SFAS No. 123 (revised 2004),
Share-Based
    Payment
, stock compensation expense, is recorded based upon
    the estimated fair value of the stock option at the date of
    grant. The accounting estimate related to stock-based
    compensation is considered a "critical accounting
    estimate" because estimates are made in calculating
    compensation expense including expected option lives, forfeiture
    rates and expected volatility. Expected option lives are
    estimated using vesting terms and contractual lives. Expected
    forfeiture rates and volatility are calculated using historical
    information. Actual option lives and forfeiture rates may be
    different from estimates and may result in potential future
    adjustments which would impact the amount of stock-based
    compensation expense recorded in a particular period.
Income
    Taxes
We account for income taxes in accordance with
    SFAS No. 109,
Accounting for Income Taxes
.
    Accordingly, we provide deferred income tax assets and
    liabilities based on the estimated future tax effects of
    differences between the financial and tax bases of assets and
    liabilities based on currently enacted tax laws. A valuation
    allowance is established for deferred tax assets in amounts for
    which realization is not considered more likely than not to
    occur.
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The accounting estimate related to income taxes is considered a
    "critical accounting estimate" because judgment is
    exercised in estimating future taxable income, including prudent
    and feasible tax planning strategies, and in assessing the need
    for any valuation allowance. To date we have determined a 100%
    valuation allowance is required and accordingly no amounts have
    been reflected in our consolidated financial statements. In the
    event that it should be determined that all or part of a
    deferred tax asset in the future is in excess of the nil amount
    currently recorded, an adjustment of the valuation allowance
    would increase income to be recognized in the period such
    determination was made.
In addition, the calculation of our tax liabilities involves
    dealing with uncertainties in the application of complex tax
    regulations. As a result of the implementation of Interpretation
    No. 48,
Accounting for Uncertainty in Income Taxes- an
    interpretation of FASB Statement No. 109
, we recognize
    liabilities for uncertain tax positions based on the two-step
    process prescribed within the interpretation. The first step is
    to evaluate the tax position for recognition by determining if
    the weight of available evidence indicates that it is more
    likely than not that the position will be sustained on audit,
    including resolution of related appeals or litigation processes,
    if any. The second step requires us to estimate and measure the
    tax benefit as the largest amount that is more than 50% likely
    of being realized upon ultimate settlement. It is inherently
    difficult and subjective to estimate such amounts, as this
    requires us to determine the probability of various possible
    outcomes. We re-evaluate these uncertain tax positions on a
    quarterly basis. This evaluation is based on factors including,
    but not limited to, changes in facts or circumstances, changes
    in tax law, effectively settled issues under audit and new audit
    activity. Such a change in recognition or measurement would
    result in the recognition of a tax benefit or an additional
    charge to the tax provision in the period.
Finally, any future recorded value of our deferred tax assets
    will be dependent upon our ability to generate future taxable
    income in the jurisdictions in which we operates. These assets
    consist of research credit carry-forwards, capital and net
    operating loss carry-forwards and the future tax effect of
    temporary differences between balances recorded for financial
    statement purposes and for tax return purposes. It will require
    future pre-tax earnings of in excess of $12.2 million in
    order to fully realize the value of our unrecorded deferred tax
    assets. If we were to sustain future net losses, it may be
    necessary to record valuation allowances against such deferred
    tax assets in order to recognize impairments in their estimated
    future economic value.
Key
    Performance Indicators
We believe that a key indicator for our business is the trend
    for the volume of orders received from customers, especially
    those orders related to night-vision electronic modules. During
    weak economic periods, customers' ability to forecast their
    requirements deteriorates causing delays in the placement of
    orders. Forward-looking visibility on customer orders is at an
    all time low. Our major night-vision electronics modules
    customers (Kopin and DRS Technologies, Inc.) are placing orders
    for product only when they have orders in hand from their
    governmental customer. Total shipments of night vision
    electronics module customers in 2008 amounted to $6,068,449,
    compared to $1,418,249 in 2007.
Comparison
    of Fiscal Years Ended December 31, 2008 and
    December 31, 2007
Sales.
Our sales were $12,564,487 for the year
    ended December 31, 2008 compared to $10,146,379 for the
    year ended December 31, 2007. This represents a 23.8%
    increase for the year 2008 over the year 2007. Our sales from
    defense products increased to $6,471,824 from $1,418,249 in
    2008, an increase of $5,053,575 or 356.3%. The increase resulted
    primarily from new orders of night vision drive electronics from
    prime contractors and the introduction of our
    Tac-Eye
®
display product line in the fourth quarter of 2008. Sales from
    our defense-related engineering programs decreased to $1,548,703
    versus $5,445,376 in 2007. The large decrease was the result of
    the start and completion of a $4.3 million engineering
    program in late 2007. Consumer Video Eyewear product sales
    increased to $4,451,121 for the year ended December 31,
    2008 compared to $3,282,755 for our 2007 year. This 35.6%
    increase resulted from a broader Video Eyewear product line and
    increased distribution in the United Kingdom and Japan.
    Low-vision assist sales for 2008, consisting mainly of sales of
    low-vision assist products, were $92,839 versus none in fiscal
    2007.
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Cost of Sales and Gross Margin.
Gross margin
    increased to $3,700,979 for fiscal 2008 from $3,362,906 for
    fiscal 2007, an increase of $338,073 or 10.1%. As a percentage
    of net sales, gross margin decreased to 29.5% for fiscal 2008
    compared to 33.1% for fiscal 2007. This reduction was the result
    of changes in our revenue mix and related margins. Generally, we
    earn a higher gross margin on engineering only programs as
    compared to the gross margin on products, in which we incur cost
    of goods or volume production costs. Engineering services
    revenues decreased to 12.3% as a percentage of total sales in
    2008 versus 53.7% of total sales in 2007, resulting in the
    majority of the reduction in overall gross margin in 2008 versus
    fiscal 2007.
Research and Development.
Our research and
    development expenses in 2008 increased by $1,001,106, or 42.3%,
    to $3,366,518 in fiscal 2008 versus $2,365,412 in 2007. This was
    due to increased internal development activities and less direct
    support of our research under government funded engineering
    programs. Expenses we incur under government funded engineering
    programs are included in costs of goods sold.
Selling and Marketing.
Selling and marketing
    expenses were $2,128,625 for fiscal 2008 as compared to
    $1,920,164 for fiscal 2007, an increase of $208,461 or 10.9%.
    Despite the increase in absolute dollars, as a percentage of
    total sales, the selling and marketing expenses decreased to
    16.9% of sales for fiscal 2008 as compared to 18.9% for fiscal
    2007. The absolute dollar increase was primarily due to
    increased advertising expenses along with increased marketing
    support paid out to our expanded consumer products resellers and
    the introduction of in-store point of purchase displays with US
    resellers.
General and Administrative.
General and
    administrative expenses were $2,299,685 for fiscal 2008 as
    compared to $1,718,627 for fiscal 2007, an increase of $581,058
    or 33.8%. The higher general and administrative related to
    increases in staff and personnel costs, and increased legal
    expenses.
Depreciation and Amortization.
Our
    depreciation and amortization expense increased by $136,055, or
    36.4%, to $510,133 in 2008 versus $374,078 in 2007. The increase
    was related to increased depreciation on new capital
    expenditures in 2008 and 2007.
Other Income (Expense).
Total other expenses,
    consisting primarily of interest expense, was $285,005 in 2008
    versus $142,511 for 2007. The increase in expenses was primarily
    attributable to an offsetting legal settlement received during
    2007 in the amount of $96,632.
Provision (Benefit) for Income Taxes.
The
    provision for income taxes for the year ended December 31,
    2008 was $5,212 versus a net benefit of ($98,372) in 2007.
    The 2007 net benefit includes our accrual of $130,130 in
    New York State tax credits for our research and development
    activities. The balance of each year's tax provision was
    primarily for franchise taxes payable to the State of Delaware,
    our state of incorporation. These taxes were $5,212 for 2008 and
    $31,758 for 2007. This decrease was a result of the
8-for-1
split of our common stock in July 2008.
Net (Loss) and (Loss) per Share.
Our net loss
    was $(4,894,199) or $(0.0229) per share in 2008, an increased
    loss of $(1,834,685), or (60.0)%, from $(3,059,514) or $(0.0160)
    per share in 2007.
Comparison
    of Fiscal Years Ended December 31, 2007 and
    December 31, 2006
Sales.
Our sales were $10,146,379 for the year
    ended December 31, 2007 compared to $9,538,308 for the year
    ended December 31, 2006. This represents a 6.4% increase
    for the year 2007 over the year 2006. Our sales from defense
    products decreased to $1,418,249 from $4,888,243 in 2006, a
    decrease of $3,469,994. The decrease resulted from reduced
    orders from the prime defense contractor caused by technical
    problems in other areas of their supply chain. Sales from our
    defense related engineering programs increased to $5,445,375
    versus $2,627,442 in 2006. This large increase was the result of
    a new $4.3 million government research and development
    program in 2007. Consumer Video Eyewear product sales increased
    to $3,282,755 for the year ended December 31, 2007 compared
    to $2,022,623 for our 2006 fiscal year. This 62.3% increase
    resulted from the introduction of three new Video Eyewear models
    in 2007 and the commencement of our European sales activities in
    late 2007.
Cost of Sales and Gross Margin.
Gross margin
    decreased to $3,362,906 for fiscal 2007 from $3,770,758 for
    fiscal 2006, a decrease of $407,852 or 10.8%. As a percentage of
    net sales, gross margin decreased to 33.1% for fiscal 2007
    compared to 39.5% for fiscal 2006. This reduction was the result
    of changes in our revenue mix and related margins. Generally, we
    earn a higher gross margin on our defense products as compared
    to the gross margin
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on consumer products, and with the introduction of three new
    consumer Video Eyewear products our margins decreased. As
    defense product sales as a percentage of our total sales
    decreased to 14.0% in 2008 versus 51.2% in 2006 our overall
    margins decreased.
Research and Development.
Our research and
    development expenses in 2007 increased by $1,086,173 or 84.9%,
    to $2,365,412 in fiscal 2007 versus $1,279,239 in 2006. This was
    due to increases in the number of our research and development
    personnel and the lease of additional space dedicated to this
    function.
Selling and Marketing.
Selling and marketing
    expenses were $1,920,164 for fiscal 2007 as compared to
    $1,191,800 for fiscal 2006, an increase of $728,364 or 61.1%.
    The increase resulted from the preparatory marketing and
    advertising launch expenses by three new consumer Video Eyewear
    products, the establishment of our first print advertising
    programs and increased trade show costs to promote our new Video
    Eyewear products.
General and Administrative.
General and
    administrative expenses were $1,718,627 for fiscal 2007 as
    compared to $1,560,278 for fiscal 2006, an increase of $158,349
    or 10.1%. The increase was mainly attributable to increased
    staffing and legal expenses.
Depreciation and Amortization.
Our
    depreciation and amortization expense increased by $97,089, or
    35.1%, to $374,078 in 2007 versus $276,989 in 2006. The increase
    was related to increased depreciation provisions on new capital
    expenditures in 2007 and full year's provision on our 2006
    additions.
Other Income (Expense).
Total other expenses,
    consisting primarily of interest expense, was $142,511 in 2007
    versus $178,706 in 2006. Our borrowing costs were $62,673 higher
    in 2007 than in 2006 but our 2007 borrowing costs were offset by
    $96,632 in miscellaneous income related to the settlement of a
    legal dispute.
Provision (Benefit) for Income Taxes.
The
    provision for income taxes for the year ended December 31,
    2007 was a net benefit of $98,372 versus an expense of $3,700
    for 2006. The 2007 benefit includes our accrual of $130,130 in
    New York State tax credits for our research and development
    activities. The balance of each year's tax provision was
    primarily attributable to franchise taxes payable to the State
    of Delaware, our state of incorporation. These taxes were
    $31,758 for 2007 and $3,700 for 2006. The large increase was a
    direct result of the
7-for-1
reverse stock split that took place in 2007.
Net (Loss) and (Loss) per Share.
Our net loss
    was $(3,059,514) or $(0.0160) per share in 2007, a decrease of
    $(2,339,560) from $(719,954) or $(0.0047) per share in 2006.
Comparison
    of Three Months Ended March 31, 2009 and March 31,
    2008
Sales.
Our sales were $3,043,994 for the three
    months ended March 31, 2009 compared to $1,720,914 for the
    three months ended March 31, 2008. This represents a 76.9%
    increase for the 2009 period over the comparable 2008 period.
    Our sales from defense production programs increased to
    $1,479,794 for the 2009 period from $855,601 in the comparable
    2008 period, an increase of $624,194. The increase resulted
    directly from increased orders from our night vision display
    drive electronics customer. Sales from our defense related
    engineering services programs increased to $448,490 for the 2009
    period versus $57,039 in the comparable 2008 period. Engineering
    services were unusually slow in 2008 as we were in transition
    between programs. Consumer Video Eyewear product sales increased
    to $1,101,186 for the three months year ended March 31,
    2009 compared to $808,274 for the same period in 2008. This
    36.2% increase resulted mainly from our increased distribution
    in the United Kingdom and Japan as compared to 2008. Low-vision
    assist sales for the three months ended March 31, 2009 were
    $14,523. There were no such sales for the same period in 2008.
Cost of Sales and Gross Margin.
Gross margin
    increased to $1,187,311 for the three-month ended March 31,
    2009 from $233,565 for three months ended March 31, 2008,
    an increase of $953,746 or 408.3%. As a percentage of net sales,
    gross margin increased to 39.0% for 2009 period compared to
    13.6% for the comparable 2008 period. Gross margins for the 2008
    period were lower than for the similar period in 2009 due to
    product clearance activities, when an older product model was
    being phased out and larger reseller discounts were being
    offered to assist its sales. Additionally, changes in our
    revenue mix and their related margins improved margins for the
    2009 period. Generally, we earn a higher gross margin on
    engineering services and our defense product sales as compared
    to the gross margin on products and they were 63% of total
    revenues in 2009 versus 53% for the same period in 2008.
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Research and Development.
Our research and
    development expenses in the three months ended March 31,
    2009 were $502,011 versus $736,716 in the comparable 2008
    period, a decrease of $234,705 or 31.9%. This was due to staff
    reductions made in late 2008 and a decreased use of external
    contractors in the 2009 period versus 2008.
Selling and Marketing.
Selling and marketing
    expenses were $449,266 for the three months ended March 31,
    2009 as compared to $449,562 for the comparable 2008 period, a
    small decrease of just $296. As a percentage of total sales, the
    selling and marketing expenses decreased to 14.8% of sales for
    the three month period in 2009 as compared to 26.1% for same
    period in fiscal 2008.
General and Administrative.
General and
    administrative expenses were $478,253 for the three months ended
    March 31, 2009 as compared to $533,799 for the comparable
    2008 period, a decrease of $55,546 or 10.4%. The lower general
    and administrative related to decreases in staff and personnel
    costs for the 2009 period against the 2008 period.
Depreciation and Amortization.
Our
    depreciation and amortization expense increased by $15,138, or
    12.2%, to $138,834 in the three months ended March 31, 2009
    versus $123,696 in the comparable 2008 period. The increase was
    related to increased depreciation provisions on new capital
    expenditures made later in fiscal 2008.
Other Income (Expense).
Interest expense, net
    of interest income and foreign exchange adjustments, was $66,648
    in the three months ended March 31, 2009 versus $41,234 for
    the comparable 2008 period. The increase represents increased
    borrowings and higher interest rates on a note payable.
Provision (Benefit) for Income Taxes.
The
    provision for income taxes was for franchise taxes to Delaware,
    our state of incorporation. Such income taxes for the three
    months ended March 31, 2009 were $888 and $753 for the
    comparable 2008 period.
Net (Loss) and (Loss) per Share.
Our net loss
    was $(448,589) (or $(0.0022) per share) in the three months
    ended March 31, 2009, an improvement of $1,203,606, or
    72.8%, from the larger loss of $(1,652,195) or $(0.0084) per
    share in the comparable 2008 period.
Liquidity
    and Capital Resources
As of March 31, 2009, we had cash and cash equivalents of
    $259,151, a reduction of $559,568 from $818,719 as of
    December 31, 2008.
Our cash requirements are primarily for research and
    development, product tooling, and working capital. Historically,
    we have met these requirements through capital generated from
    the sale and issuance of our common equity securities,
    convertible debt and notes payable to private investors, cash
    flow provided by operations and our revolving bank lines of
    credit.
Operating Activities.
Cash (used in) operating
    activities was $(1,285,449) in fiscal 2008 and $(3,295,900) in
    fiscal 2007. Changes in operating assets and liabilities,
    excluding cash, provided (used) cash were $2,785,425 in fiscal
    2008 and $(800,177) in fiscal 2007. The decreases in our
    accounts receivable by December 31, 2008 of $1,494,613
    along with a $733,691 increase in accounts payable and customer
    deposits of $683,040 primarily resulted in this cash flow
    improvement in 2008 over 2007. Cash (used in) operating
    activities was $(761,919) and $(208,047) for the three-month
    periods ended March 31, 2009 and 2008, respectively.
    Changes in operating assets and liabilities, excluding cash,
    provided (used) cash were $(492,853) and $1,273,868 for the
    three-month periods ended March 31, 2009 and 2008,
    respectively. The 2009 period's use resulted mainly from
    decreases in accounts payable and customer deposits whereas the
    provision of cash for the same period in 2008 resulted primarily
    from a decrease in accounts receivable in the three-month
    periods.
Investing Activities.
Cash used in investing
    activities was $549,804 in fiscal 2008 and $316,743 in fiscal
    2007 and $60,208 and $164,927 for the three-month periods ended
    March 31, 2009 and 2008, respectively. Cash used for
    investing activities in fiscal 2008 related primarily to
    production tooling and computer software equipment additions of
    $424,166 and in the three-month period ended March 31, 2009
    related primarily to tooling acquisitions of $19,369. The costs
    of registering our intellectual property rights, including in
    the investing activities described
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above were $125,638 in fiscal 2008 and $136,433 in fiscal 2007
    and $40,839 and $42,547 for the three-month periods ended
    March 31, 2009 and 2008, respectively.
Financing Activities.
Cash provided by
    financing activities was $2,289,116 in fiscal 2008 and
    $3,408,328 in fiscal 2007 and $262,559 and $77,652 for the
    three-month periods ended March 31, 2009 and 2008,
    respectively. We sold shares of our common stock for aggregate
    gross proceeds of $2,138,646 in 2008 and $3,792,362 in 2007 and
    $300,000 in the three-month period ended March 31, 2009 in
    private placements offerings. In the three-month period ended
    March 31, 2008 we sold shares of our common stock for
    aggregate gross proceeds of $16,697 upon exercise of stock
    options.
Capital Resources.
As of December 31,
    2008, we had a cash balance of $818,719. We had $10,210 in
    available bank lines of credit (total drawings as of
    December 31, 2008 were $202,290). As of March 31,
    2009, we had a cash balance of $259,151. We had $12,733 in
    available bank lines of credit (total drawings as of
    March 31, 2009 were $199,767). The credit lines are with
    two banks, are payable on demand and secured by the personal
    guarantee of our President and Chief Executive Officer, Paul J.
    Travers. The bank credit agreements contain various restrictions
    on indebtedness, liens, guarantees, redemptions, mergers,
    acquisitions or sale of assets, loans, transactions with any
    affiliates, and investments. They also prohibit us from
    declaring dividends without the bank's prior consent.
Our cash requirements depend on numerous factors, including new
    product development activities, our ability to commercialize our
    products, their timely market acceptance, selling prices and
    gross margins, and other factors. We expect to carefully devote
    capital resources to continue our development programs, hire and
    train additional staff, expand our research and development
    activities, new product marketing and increased inventory
    levels. Assuming we are able to continue to increase our sales
    and maintain our planned gross margins, we anticipate that we
    will also experience growth in our operating expenses for the
    foreseeable future. Our net operating income or loss, product
    tooling expenses, and related working capital investments will
    be the principal use of our cash. In particular, we expect that
    potentially significant amounts of working capital investments
    in accounts receivable and inventories that are not offset by
    corresponding increases in accounts payable will use cash with
    our planned growth.
We anticipate, based on our internal forecast and assumptions
    relating to our operations (including, among others, assumptions
    regarding our working capital requirements, the progress of our
    research and development efforts and Video Eyewear product sales
    and gross margins) that, taking into account the anticipated
    proceeds of the sale of our securities pursuant to this
    prospectus, we will have sufficient cash to meet our working
    capital and other cash flow requirements for at least the next
    12 months.
The recent global economic crisis has caused disruptions and
    extreme volatility in global financial markets, increased rates
    of default and bankruptcy, and has impacted consumer spending
    levels. These macroeconomic developments could adversely affect
    our business, operating results or financial condition. Current
    or potential customers, including suppliers to the US
    government, may delay or decrease spending on our products and
    services as their business
and/or
budgets are impacted by economic conditions. The inability of
    current
and/or
potential customers to pay us for our products and services may
    adversely affect our earnings and cash flows.
Current
    Financial Position
As of the date of this prospectus we had approximately $363,478
    in cash and cash equivalents.
In May 2009, we were awarded an indefinite delivery/indefinite
    quantity (IDIQ) contract to deliver our
Tac-Eye
LT
®
display system to the Air Force's Battlefield Airman
    Program. The system has been developed over the last five years
    with support from various US military commands including the Air
    Force Research Laboratory, Natick Soldier Center and US Special
    Operations Command (USSOCOM). If the Air Force exercises all of
    its options under the contract, our revenues under the contract
    could equal $2 million over the next 19 months.
In October 2008, we received approval of a $640,000 government
    engineering program. We anticipate that the contract relating to
    this award will be executed and our work on the program will
    commence during 2009. We expect the program to be completed in
    nine months.
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As of the date of this prospectus we had approximately
    $2,728,000 in purchase orders for our defense-related, night
    vision drive electronics. Those purchase orders are generally
    non-cancelable. Work on those purchase orders is expected to
    commence in September 2009. Backorders for our Video Eyewear
    products as of the date of this prospectus were less than
    $78,300, which is normal for this time of the year for our
    consumer product sales. Since March 31, 2009, our inventory
    and accounts payable have not changed materially but we expect
    them to increase further during the remainder of 2009.
We believe that the anticipated additional growth in sales from
    sales of our Video Eyewear should contribute to revenue growth
    for the remainder of 2009 and beyond. We believe that sales from
    our defense programs should also contribute to revenue growth
    for the remainder of 2009 and beyond. We anticipate that we will
    continue to experience increases in our sales and marketing, and
    general operating expenses throughout the remainder of 2009 and
    in 2010 but that they should not grow as a percentage of overall
    sales.
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BUSINESS
Company
    Overview
We are engaged in the design, manufacture, marketing and sale of
    devices that are worn like eyeglasses and feature built-in video
    screens that enable the user to view video and digital content,
    such as movies, computer data, the Internet or video games. Our
    products (known commercially as Video Eyewear but also commonly
    referred to as virtual displays, wearable displays, personal
    viewers, head mounted displays, or near-to-eye displays) are
    used to view high-resolution video and digital information from
    mobile electronic devices, such as cell phones, portable media
    players, gaming systems and laptop computers. Our products
    provide the user with a viewing experience that simulates
    viewing a large screen television or a desktop computer monitor
    that can be viewed practically anywhere, anytime.
Our Video Eyewear products feature high performance miniature
    display modules, low power electronics and related optical
    systems. We produce both monocular and binocular Video Eyewear
    devices that we believe are excellent solutions for uses
    including many mobile computer, mobile internet devices
    (MID) or video viewing requirements, including general
    entertainment applications. We focus on two markets: the
    consumer markets for gaming and mobile video and rugged mobile
    displays for defense and industrial applications. We also offer
    low-vision assist Video Eyewear products that are designed to
    assist and improve the remaining vision of many people suffering
    from macular degeneration.
Owners of mobile display devices increasingly want to use them
    to view high-resolution, full color content. The displays
    currently used in these mobile devices do not work well for this
    purpose because they are either too small, which makes it
    extremely difficult for the human eye to view the detail of the
    images that they display, or they are too large, making the
    device heavier, larger and difficult to carry. Recently, some
    mobile devices, like the iPhone, have employed a touch screen
    with software capable of magnifying or zooming in on a small
    portion of the image. We believe that many consumers consider
    this solution unsatisfactory because it is not like their
    desktop computer viewing experience and they find it difficult
    to navigate touch screens and to find information on the portion
    of the image being viewed.
In contrast, our Video Eyewear products enable users of many
    mobile devices to effectively view the entire screen on a small,
    eyeglass-like device. They can be used as a wearable replacement
    for any television or desktop computer monitor in almost any
    environment. Our products employ microdisplays that are smaller
    than one-inch diagonally, with some as small as one-quarter of
    an inch. They can display an entire, detailed image with
    resolution of up to 1280×720 pixels (High Definition or
    HD). The images on the microdisplay are viewed through
    proprietary magnifying optics that are usually designed by us
    and incorporated into our Video Eyewear products. Using these
    optics and displays, our Video Eyewear products provide a
    virtual image that appears to be similar to the image on a full
    size computer screen from a normal desktop working distance or
    the image on a large flat panel television from normal home TV
    viewing distance. For example, when magnified through our
    optics, a high-resolution 0.44-inch diagonal microdisplay can
    provide a viewing experience comparable to that on a
62-inch
diagonal television screen viewed at nine feet.
Overall
    Strategy
Our goal is to establish and maintain a leadership position as a
    worldwide supplier of Video Eyewear and virtual imaging
    technology solutions. We intend to offer our technologies across
    major markets, platforms and applications. We will strive to be
    an innovator in designing virtual display devices that enable
    new mobile video viewing and general entertainment applications.
To maintain and enhance our position as a leading provider of
    virtual display solutions, we intend to:
•
improve brand name recognition;
•
provide excellent products and service;
•
develop products for large markets;
•
broaden and develop strategic relationships and partnerships;
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•
promote and enhance development of third party software that can
    take advantage of our products;
•
expand market awareness for Video Eyewear, including use for
    Virtual Reality and Augmented Reality;
•
obtain and maintain market leadership and expand customer base;
•
maintain and exploit cost advantage;
•
extend our proprietary technology leadership;
•
enhance and protect our intellectual property portfolio;
•
establish multiple revenue sources;
•
continue to invest in highly qualified personnel;
•
build and maintain strong design capabilities; and
•
leverage our outsourcing model.
The
    Market
We believe that there is growing demand for mobile access to
    high-resolution content in several major markets. Our business
    focuses on the consumer mobile entertainment and gaming markets
    and the industrial and defense markets. The demand for personal
    displays in these markets is being driven by such factors as:
•
Increasing use of the Internet in all aspects of society and
    business, which is increasing demand for Internet access
    "anywhere, anytime".
•
Low cost wireless networks, with significantly increased
    bandwidths and improved compression of digital media, continue
    to evolve. They now allow users to view television or access the
    Internet on mobile devices. However, the relatively lower
    resolution and larger size of the displays currently used in
    these mobile devices do not allow the users to take full
    advantage of the high-resolution content available to them. We
    believe that our Video Eyewear products are well suited for this
    purpose.
•
Increased spending by consumers on mobile entertainment devices
    such as iPods and cellular telephones. We expect that
    full-featured, cellular handsets with video capabilities will
    become more widely available and that a single handset will
    replace today's separate telephone, PDA, digital camera,
    handheld game player and MP3 music player. Our Video Eyewear
    products can provide viewable high-resolution mobile displays
    for users of these merged devices, with better viewing
    capability and higher detailed resolution than the small screens
    on existing mobile devices.
•
Industrial, defense and security sectors are employing mobile
    communications, sensors and surveillance devices that are light,
    durable and easy to use but require displaying their
    high-resolution content on an external device and often in a
    hands-free way. Our wearable Video Eyewear products can be ideal
    for this and will allow a user their physical mobility.
•
Video gaming on PCs and consoles continues to grow in North
    America and around the world. We believe that our Virtual
    Display technologies will significantly increase user
    satisfaction with gaming applications by engaging the user
    through the use of stereoscopic imagery and interactive head
    tracking. Our Virtual Reality and Augmented Reality Video
    Eyewear are designed to provide this capability.
•
The widening distribution of new three dimensional (3D) movies
    and other 3D content in North America is creating a need for a
    method to play this content outside movie theaters. We believe
    that Video Eyewear, with its inherent dual display design, is
    well suited for the playback of 3D content. Stereoscopic 3D
    video playback on Video Eyewear also avoids many of the negative
    issues commonly encountered by shutter, polarized or color
    anaglyph glasses used in competing technologies and allows the
    user to view 3D content without purchasing new computer or
    television equipment.
•
People with low-vision problems require devices to magnify and
    capture images that they wish to see and to display them in a
    manner that they can view with their remaining vision. Our Video
    Eyewear, with the
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addition of a camera and digital signal processing in a single
    device, can provide this capability to many people suffering
    from certain types of vision problems.
Target
    Markets
Our target markets and applications by major sector are:
Consumer
Entertainment and Internet
.
We believe
    that there is an increasing demand for convenient,
    high-resolution, 3D displays to view content such as movies,
    entertainment and the Internet in a mobile environment.
Gaming.
We believe that there is a need
    for high-resolution, interactive, stereoscopic 3D display
    devices for use with desktop computers, consoles and other
    gaming products. We believe that gaming on modern mobile devices
    with small, direct view screen is not a satisfactory experience
    for many consumers. Our Video Eyewear products are designed to
    significantly enhance a consumer's experience by providing
    larger, high-resolution images with stereoscopic 3D
    capabilities. We believe that there is also a demand for display
    devices that enable the user to simulate and experience movement
    within a three-dimensional environment when using either gaming
    consoles or mobile devices. We anticipate that Virtual Reality
    (VR) (which allows a user to interact with a computer-simulated
    environment, whether that environment is a simulation of the
    real world or an imaginary world) and Augmented Reality (AR)
    (which combines real-world and computer-generated data in real
    time) will become increasingly popular entertainment
    applications. Both VR and AR are difficult to implement using
    traditional desktop computer monitors and televisions.
Industrial
    and Defense
The US government requires display devices for mobile and
    hands-free viewing of computer and mapping information, remote
    viewing of sensor data, and remote viewing of transmissions from
    targeting systems. These applications currently include:
•
Night vision and thermal sighting systems;
•
Unmanned vehicle and robotic systems; and
•
Training and simulation systems, including AR Video Eyewear.
These systems typically are required to provide detailed,
    high-resolution images, with limited power consumption and low
    external light emission, and to be durable.
Our Video Eyewear products are also used for a number of
    industrial applications, including as remote camera displays and
    wearable computer displays, for viewing of industrial thermal
    signature systems and for providing hands-free access to manuals
    and other required information in remote and in-field
    maintenance servicing.
Low-vision
    Assist
We believe that our Video Eyewear products may provide solutions
    for patients suffering from certain types of visual handicaps.
    Our low-vision assist products are designed to assist patients
    suffering from macular degeneration by signal processing and
    re-focusing an integrated camera image into the areas of the
    retina that are not affected by the patient's macular
    degeneration.
In the United States, macular degeneration in older people is
    the leading cause of loss of sight. As an indication of the size
    of the low-vision assist market, according to US National Eye
    Institute, there are currently over 1.8 million Americans
    suffering from some form of degenerative low-vision disease with
    an additional 200,000 being diagnosed annually.
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Products
We believe we provide the broadest range of consumer Video
    Eyewear product offerings available in the market and that our
    products contain the most advanced electronics and optics for
    their target markets and uses. Our products include:
Binocular
    Video Eyewear Products
The features of our binocular Video Eyewear products, including
    their resolution and apparent display size, microphones,
    tracking devices and support of three-dimensional viewing are
    designed to suit consumer applications. Our binocular Video
    Eyewear products contain two microdisplays, a separate display
    for each eye, typically mounted in a frame attached to eyeglass
    style-temples. These products enable mobile and hands-free
    private viewing of video content on screens that simulate home
    theater-sized screens. Headphones are built into the temples so
    that users can listen to accompanying audio in full stereo. They
    can be employed as mobile high-resolution displays with products
    such as portable DVD players, laptop computers, MIDs, cellular
    phones with video output capability, and personal digital
    media/video players (video iPods).
For the consumer markets, we currently produce four binocular
    Video Eyewear products, all of which support 3D applications.
    Each has a different apparent display size and native
    resolution. They are:
•
AV230 XL — QVGA (320x240 three-color pixels)
    resolution and simulating a
44-inch
screen at nine feet.
•
AV310 widescreen — WQVGA (420x240 three-color pixels)
    resolution and simulating a
52-inch
screen at nine feet.
•
AV920 — VGA (640x480 three-color pixels) resolution
    and simulating a
62-inch
screen at nine feet.
•
VR920 — VGA (640x480 three-color pixels) resolution,
    simulating a
62-inch
screen at nine feet, designed to plug into a computer's USB
    and video ports, and containing our proprietary three degrees of
    freedom head tracking technology, which enables the user to look
    around the environment being displayed by simply moving his or
    her head. A microphone allows the user to communicate with
    others. We expect those features to be of particular interest to
    users playing games using the VR920, but they also can be used
    in commercial 3D applications and for exploring Internet virtual
    worlds like Second Life. The VR920 is currently compatible with
    over 80 titles that work with it out of the box, including
    popular games such as Microsoft's Flight Simulator X and
    World of Warcraft. We currently have over 1000 software
    developers' kits being used in applications from college
    research programs to commercial developers to develop additional
    titles for the VR920. With the addition of a clip-on camera
    which we are currently tooling the VR920 can also used in AR
    applications.
We sell our current binocular products into the consumer
    marketplace under the brand
    iWear
®
.

    At the Consumer Electronics show in January 2009 we introduced
    our first sunglass styled Video Eyewear product that we will be
    selling under the
    Wrap
tm
brand. We plan to introduce two versions of our Wrap optics,
    including one that will both allow the user to see through to
    the real world when the display is off or be just partially
    transparent when the display is on. The first version will not
    be see-through and we expect it will be introduced by October
    2009. We anticipate that by spring 2010 we will be offering a
    second version with see-through optics and a higher display
    native resolution that will accept HD inputs and support AR
    applications and at the same time be backwards compatible to all
    the VR920 gaming applications already written. We also
    anticipate that by spring 2010 we will be offering our six
    degrees of freedom tracking technology, which is currently still
    in development. That technology is being designed to both
    accurately track an object's and the user's position
    in 3D virtual space and to combine that tracking capability with
    translational information about the three rotational axes (roll,
    yaw, pitch). The addition of this translational information will
    allow the device to report information about its X, Y and Z
    position as it moves. This will expand the realism and accuracy
    for users interacting in a VR or AR environment. We anticipate
    that our six degrees of freedom tracking technology will be
    available both separately as an accessory and as a built-in
    feature of many of our Video Eyewear products.
We anticipate that future generations of our Video Eyewear
    products will have form factors that should be even more
    appealing to consumers, with appearances and sizes that are more
    like ordinary sunglasses, and be more
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ergonomic and fashionable. We intend to sell our binocular
    products into the defense markets and have developed and
    delivered prototypes of a rugged version for marine
    applications. We also intend to sell our binocular products for
    industrial applications that are similar to those in the defense
    markets and with our new
    Wrap
tm
line of Video Eyewear we anticipate advanced applications from
    training and tools for maintenance and repair to interactive
    product design and development.
Monocular
    Video Eyewear Products
Our
    Tac-Eye
®
monocular (single eye) high-resolution Video Eyewear models are
    designed to clip onto a pair of ballistic sunglasses, a head set
    or conventional safety goggles. They can be used with the large
    installed base of rugged laptops, security and night vision
    cameras and thermal night vision sights, including those systems
    that we currently act as a sub-contractor of display drive
    electronics to the US defense department.
    Tac-Eye
®
enables users to have wearable, private and hands-free access to
    high-resolution content or information. They enable the viewing
    of material that is difficult or impossible to accurately view
    on the lower-resolution direct view screens that are standard on
    many of these devices without extensive zooming in or panning
    across the screen.
Most of our
    Tac-Eye
®
products have an SVGA display and afford a 28 degree field of
    view, the equivalent of a
20-inch
computer screen at three feet. They are also designed to be
    durable and suitable for defense field use and industrial
    applications.
Defense
    Sub-Assembly and Custom Solutions
We are involved in two programs as part of contracting teams
    that produce display drive electronic subassemblies for light,
    medium, and heavy weight thermal weapon systems for US and other
    defense forces. We produce the display drive electronics as part
    of these night-vision systems and over the last five years we
    have delivered over 107,000 systems. These products have
    accounted for over 50% of our sales in the last two years.
We also have provided full optics systems, including head
    mounted devices, wrist worn displays, human computer interface
    devices, and wearable computers as prototypes under several
    armed services test programs. These are being tested in
    applications such as the remote control of unmanned vehicles.
    When possible, we obtain a first right of refusal to be the
    volume manufacturer of our proprietary display subassemblies as
    part of our contracting process for the custom design of
    products.
Low-vision
    Assist Products
We offer two Video Eyewear products specifically for low-vision
    assist applications. The first is a bundle of our AV920 Video
    Eyewear with an external handheld camera that magnifies written
    information to help a user to read small print. The second
    consists of binocular Video Eyewear that incorporates a camera
    and digital signal processor that uses our proprietary digital
    signal processing algorithms to increase contrast,
    magnification, color correction, edge detection, histogram
    flattening, and using other video processing techniques. The
    image received by the camera is processed, enhanced and
    transmitted to the displays within the Video Eyewear to be
    viewed by a user suffering from macular degeneration. These
    devices are designed to permit many users suffering from macular
    degeneration to perform a number of normal daily functions, such
    as reading or signing a check, that they could not perform
    unaided.
Technology
We believe that it is important to make substantial investments
    in research and development to maintain our competitive
    advantage. The development and procurement of intellectual
    property rights relating to our technologies is a key aspect of
    our business strategy. Near-to-eye virtual displays and their
    components use relatively new technologies. We believe that it
    is technologically feasible to improve the weight, ergonomics,
    optical performance, luminance, power efficiency, design
    compactness, field of view and resolution of the current
    generation of virtual displays and display components. We expect
    to continue to improve our products through our ongoing research
    and development and advancements made by our third party
    suppliers of key components. We also develop intellectual
    property through our ongoing performance under engineering
    service contracts for the US Government. During our fiscal years
    ended December 31, 2008, December 31, 2007 and
    December 31, 2006, we spent $3,366,518,
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$2,365,412 and $1,279,239, respectively, on research and
    development activities. We expect to continue to increase our
    research and development expenditures in the future. We have
    also acquired technologies developed by third parties and we may
    do so in the future.
We believe that the range of our proprietary technologies gives
    us a significant competitive advantage. Our technologies include
    motion tracking systems; stereoscopic display assemblies; optic
    systems; display backlights; mobile and wearable computing
    devices and user interface technology; low-power electronics;
    software drivers; and software applications. Our technologies
    enable us to provide low-cost, small form factor,
    high-resolution Video Eyewear products. To protect our
    technologies, we have developed a patent portfolio which
    consists of:
•
44 total patents issued worldwide;
•
27 US patents issued (12 non-provisional, 15 design);
•
11 US patents pending (3 design, 7 non-provisional, 1
    provisional);
•
17 international (non-US) patents issued (15 design, 2
    non-provisional);
•
10 international (non-US) patents pending (3 design, 5
    non-provisional, 2 applications under the Patent Cooperation
    Treaty); and
•
5 applications in preparation but not yet filed, covering our
    virtual display technology.
Our US patents expire on various dates from May 7, 2010
    until September 23, 2024. Our international patents expire
    on various dates from May 30, 2015 until May 30, 2030.
Major technologies that we employ in our products include:
Hardware
    Technology
Virtual
    Display Technology (including Lens Technology and Optics
    Assemblies)
Microdisplay optics represents a significant cost of goods for
    both us and our competitors. Driving this cost is the
    significant trade off between the physical size of the
    microdisplay and the cost of the supporting optics. Smaller
    displays require larger and more sophisticated optics, while
    larger displays require less magnification and less complex
    optics. The smaller a microdisplay is, the less it costs to
    produce. But the smaller a microdisplay is, the more difficult
    it is to make optics systems that have no user adjustments,
    large fields of view and very low distortion specifications. To
    improve our Video Eyewear's fashion and ergonomics we are
    developing thin and lightweight optics that can be integrated
    with display engines that match conventional eyewear frames in
    size and weight and provide what we believe are significantly
    improved ergonomics compared to competing wearable virtual
    displays.
Vuzix Quantum Optic:
We believe we have
    developed revolutionary "first surface" optics
    assemblies that include lenses, microdisplays, and backlights,
    all assembled into a single sub-assembly. This technology
    permits the production of inexpensive microdisplay engines that
    provide low-distortion and large field of view images. We expect
    that this technology will also enable us to produce
    sunglass-styled Video Eyewear products that will allow the user
    to see through the display to the real world. We expect to
    introduce the first of these products in the fourth quarter of
    2009 under the
    Wrap
tm
brand. We have both issued and pending patents with respect to
    this technology.
Vuzix Blade Optic:
We are developing an
    optical display engine that uses a blade of glass or plastic as
    a wave guide, which we refer to as the
    Blade
tm
.

    The Blade uses a "projected" image from a conventional
    microdisplay that is "squeezed" into a thin blade of
    glass or plastic and, using a proprietary light guide expander,
    the image exits from the glass in front of the user's eye.
    We expect this display engine will provide a large field of view
    from a very thin lens system. The Blade can also function in
    see-through applications. Unlike competing wearable virtual
    displays, a see-through display does not obstruct the
    wearer's vision or reduce his awareness of what is
    happening around him. Video Eyewear employing this display
    engine will be closer to conventional sunglasses than currently
    available products in comfort, size, weight and ergonomics. We
    have filed patent applications with respect to this technology.
Holographic Display Engine:
We have numerous
    patents and patents pending on our new Holographic Display
    Engine (HSE). The HSE incorporates both a display subsystem and
    associated optics in a single monolithic design. The image is
    projected into the edge of a slim piece of glass where it is
    internally reflected and directed out
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through a holographic element where it appears as a large
    virtual screen to the user. To date we have successfully
    prototyped a monochrome version of this display engine in our
    design lab. If our continued research is successful we believe
    we should ultimately have a low cost very high-resolution
    display engine that by price, resolution, weight, form factor
    and power consumption all should far exceed existing
    microdisplay technology.
Low Power — LCD Drive
    Electronics:
We believe that our numerous
    successful designs for the defense market demonstrate that we
    can design and successfully implement very low-power
    microdisplay electronics modules. The electronics required to
    drive advanced microdisplays are a complex and costly piece of a
    virtual display system. We may develop application-specific
    integrated circuits (ASICs) to further reduce the cost, number
    of components, and size of our electronics package while
    improving the performance with various input sources. While
    costly and complicated to develop, we believe these ASICs could
    be critical to the success of our cost reduction programs and,
    once completed, should also create barriers to entry for
    competitors.
Position Tracking:
Our tracking system
    incorporates patented, multi-axis, "source-less"
    tracking technology to track the rotational orientation of the
    user's head. Using the earth's magnetic field and
    gravity as references, a silicon sensor supplies the yaw
    information and a silicon-based tilt sensor supplies pitch and
    roll, as well as error correction. We have significantly reduced
    the cost of tracking with our patented technology as compared to
    competitive alternative solutions available today. We have also
    begun development on our 6 degrees of freedom tracker that adds
    translational tracking about the three rotational axes (roll,
    yaw, pitch). We believe that cost-effective tracking technology
    is fundamental to any Virtual and Augmented Reality Video
    Eyewear system's success and will help create a significant
    barrier to entry for the competition.
3D
    Content Delivery
Vuzix Automated 3D Watermark:
In response to
    the proliferation of large-screen, HD home entertainment
    systems, the motion picture industry has recently begun to
    invest in stereoscopic 3D technologies to attract theater
    viewers. Over 5,000 North American movie theaters are being
    converted to both digital projection and full 3D and production
    of 3D motion pictures is increasing. Video Eyewear, with its
    immersive environment and two separate displays, is well suited
    for viewing 3D content and avoids many of the negative issues
    typically encountered by shutter, polarized or color anaglyph
    glasses used in competing technologies such as video color
    distortion, noticeable flicker, decreased contrast and
    bleed-through. Currently, in order to effectively display 3D
    content, the viewer must manually switch the projection system
    or display device to 3D mode as required by the content. We have
    developed and have patents pending on a system that does this
    automatically for the viewer. Using our system, a
    "watermark" is embedded into the video stream that
    identifies it as being 3D content. Our Video Eyewear can decode
    the watermark and reconfigure the Video Eyewear to view the
    content in 3D without any involvement by the viewer. If the
    content is not in 3D, the Video Eyewear remains functioning in
    two-dimensional mode. Our technology can be used with both
    legacy and advanced Digital Rights Managed (DRM) delivery
    systems.
Vuzix 3D Stereoscopic USB Drivers:
We have
    developed a USB driver that will allow most 3D titles to work in
    3D stereoscopic mode with our PC based Video Eyewear. This
    driver allows 3D titles that have been and are being created
    utilizing Microsoft's Direct X 3D graphics drivers and Open
    GL, industry standards for entertainment and other 3D graphic
    applications, to be viewed in stereoscopic 3D using our Video
    Eyewear. We release support for the 3D titles using
    "Monitor Software" on a
title-by-title
basis, typically coincident with added tracking capabilities.
General
    Eyewear Technology
Vuzix Ergonomics and Industrial Designs:
We
    have developed ergonomic technologies that make head-worn
    displays easier to use in a wide variety of applications. For
    example, we are currently one of the only producers of Video
    Eyewear solutions that offers focus adjustment on our products
    that accommodate many of our users that need glasses for vision
    correction and at the same time we offer the ability to
    accommodate glasses for those that need them. We generally file
    design patents on our more advanced solutions.
Software/Firmware
    Technology
We believe that our substantial software portfolio provides a
    competitive advantage. We have developed an extensive set of
    Windows XP/Vista 32 and 64 bit drivers, Mac through to WIN CE
    and .NET drivers and core code
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capability that allows us to efficiently add new feature sets
    centered around our hardware and their related software
    products. We anticipate that this software technology will be
    the foundation for some of our future products. Additionally, we
    have a base of embedded microprocessor and field-programmable
    gate array (FPGA) code related to microdisplay drive
    electronics. We also have a large library of internally
    developed, copyright-protected software that is used throughout
    our products. Usable software applications and add-on accessory
    hardware drivers can greatly increase customer value of our
    Video Eyewear products.
Patents
    and other Intellectual Property
We have a comprehensive intellectual property policy which has
    as its objectives: (i) the development of new intellectual
    property both to ensure and further our intellectual property
    position in relation to personal display technology; and
    (ii) the maintenance of our valuable trade secrets and
    know-how. We seek to further achieve these objectives through
    the commencement of more education and training of our
    engineering staff and the adoption of appropriate systems and
    procedures for the creation, identification and protection of
    intellectual property.
Our general practice is to file patent applications for our
    technology in the United States, Europe and Japan, while
    inventions which are considered to have the greatest potential
    are further protected by the filing of patent applications in
    additional countries, including Canada, Russia and China. We
    file and prosecute our patent applications in pursuit of the
    most extensive protection including, where appropriate, the
    applications of the relevant technology to the broader display
    industry.
We believe that our intellectual property portfolio, coupled
    with our key supplier relationships and accumulated experience
    in the personal display field, gives us an advantage over
    potential competitors. We also believe our copyrights,
    trademarks, trade secrets, and patents are critical to our
    success, and we intend, directly or indirectly, to maintain and
    protect these. We also rely on proprietary technology, trade
    secrets, and know-how, which are not patented. To protect our
    rights in these areas, we require all employees and, where
    appropriate, contractors, consultants, advisors and
    collaborators to enter into confidentiality, invention
    assignment and non-competition agreements.
In addition to our various patents, Vuzix currently has 11
    registered US trademarks and a total of 27 trademark
    registrations worldwide.
Competitors
    and Competitive Advantage
The personal display industry in which we operate is highly
    competitive. We compete against both direct view display
    technology and against near-eye display technology. We believe
    that the principal competitive factors in the personal display
    industry include image size, image quality, image resolution,
    power efficiency, manufacturing cost, weight and dimension,
    feature implementation, ergonomics and finally the interactive
    capabilities of the overall display system.
Most of our competitors' products are based on direct view
    display systems, in which the user views the display device, or
    screen, directly without magnification. These products have
    several disadvantages compared to virtual displays and our Video
    Eyewear products. If the screens are large enough to read as
    conventional internet page or HD video without external
    magnification or image zooming, the products must be large and
    bulky, such as laptops, personal computers or portable DVD
    players. If the displays are small, such as those incorporated
    in cellular phones and PDA-like devices, the screens are
    difficult to read when displaying higher resolution content.
    Despite the limitations of direct view personal displays,
    advanced multi-media enabled or smart cellular phones are being
    produced in ever increasing volumes by a number of
    manufacturers, including Motorola, Inc., Nokia Corporation, Sony
    Ericsson Mobile Communications AB, Research In Motion Limited,
    Samsung Electronics Co., Ltd., LG Electronics and Apple Inc.
    (Apple). We expect that these large and well-funded companies,
    as well as newer entrants into the marketplace, will make
    products that seek to compete with ours based on improvements to
    their existing direct view display technologies or on new
    technologies.
We also have competitors who produce near eye personal displays
    or Video Eyewear. However, most of our competitors' current
    products lack one of more of the following critical features:
    advanced optics, video up-scanning, 3D stereoscopic support,
    on-screen video controls, and tracking. Furthermore, we believe
    that most of our
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competitors' near eye products have inferior optics,
    marginal electronics and poor industrial design and that, as a
    result, our Video Eyewear products are superior to those of our
    competitors in both visual performance and ergonomics. They are
    lightweight and provide high-resolution images. They have
    convenient and easy to use controls that enable the user to
    control the display. Our systems are also typically more
    power-efficient than those of our competitors. We believe that
    tracking technology is a critical component of any VR or AR
    system and that our patented tracking technology gives us a
    competitive advantage in the markets for those systems.
Competition —
    Consumer Products
A number of major companies, such as Sony, Olympus Corporation
    and Canon Inc., produced head worn video display products for
    the consumer market in the late 1990s. These products were not
    well accepted by consumers and were ultimately discontinued. We
    believe that these products were not well accepted because they
    were ergonomically unsatisfactory and provided only low
    resolution images and because, at that time, there was little
    demand for mobile Video Eyewear. When these products were
    available, video content was generally stored on video tape and
    could only be viewed by playing the videotape on a videotape
    recorder connected to a television. Currently there are a number
    of smaller companies that have products which compete with our
    Video Eyewear products. Our major competitors are MyVu, Zeiss,
    i-O Display Systems, LLC, DaeYang Co., Ltd., Cybermind
    Interactive Nederland, Mirage Innovations, Ltd., Lumus, Shenzhen
    Oriscape Electronic Co., Ltd., Microvision Corporation
    (Microvision) and Kopin.
Kopin began offering QVGA and VGA binocular display modules
    (BDM) complete with drive electronics to original equipment
    manufacturers (OEMs) in 2006. Those modules are designed for
    easy customization by OEMs and include microdisplays,
    backlights, optics and drive electronics. The availability of
    those BDMs has greatly reduced the investment required for new
    competitors to enter the business. To date, the Kopin products
    have been primarily used by Asian-based Video Eyewear
    manufacturers. Kopin does not currently compete with Vuzix at
    the retail level. Kopin is our primary supplier of microdisplays.
In addition to numerous Asian-based companies using Kopin BDMs,
    we currently have two principal competitors in the consumer
    Video Eyewear market: MyVu and Zeiss.
•
MyVu has based its most recent product line on an optic design
    that results in relatively small virtual image sizes. While this
    allows for a smaller form factor, it does not provide the large
    virtual image that we believe consumers desire from Video
    Eyewear products. Images on our Video Eyewear products appear as
    much as four times larger than those on MyVu products. MyVu
    products also do not currently support 3D, VGA video from a PC
    or tracking. Finally, MyVu does not have a Video Eyewear product
    designed specifically for the gaming market.
•
Zeiss introduced its first Video Eyewear product in the spring
    of 2008. This product is bigger and bulkier than ours and we
    believe it will be less acceptable in the mobile markets. And
    while Zeiss does provide some level of 3D video support, it does
    not currently offer PC products nor does it support the tracking
    technology that would allow its products to be interactive.
There are also several Chinese manufacturers offering Video
    Eyewear products that have one or more of the deficiencies
    described above.
Competition —
    Industrial and Defense
Although several companies produce monocular Video Eyewear, we
    believe that opportunities for sales of their products to date
    have been limited. So far, the market opportunity outside of the
    night vision products has been limited primarily to trial tests,
    rather than commercial volume purchases for defense and
    industrial applications. We are aware of only very limited
    commercial volume purchases in the defense and industrial
    markets. Our current competitors in these markets are Liteye
    Systems, Inc., Lumus, Shimadzu Corporation, Microvision, Kopin,
    Creative Display Systems, LLC, OASYS Technology, LLC, Rockwell
    Collins, Inc. and its subsidiary Kaiser. Some of these companies
    are currently shipping product and others have only introduced
    prototypes
and/or
are
    offering only limited sample quantities. We expect that we will
    encounter competition in the future from major
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suppliers of imaging and information products for defense
    application, including DRS Technologies, Inc. (DRS), Insight
    Technology Incorporated, Raytheon Company and BAE Systems, Inc.
There is competition in all classes of products manufactured by
    us, including from divisions of the large companies, as well as
    many small companies. Our sales do not represent a significant
    share of the industry's market for any class of its
    products. The principal points of competition for electronic
    products of both a defense and industrial nature include, among
    other factors: price, product performance, the experience of the
    particular company and history of its dealings in such products.
    We, as well as other companies engaged in supplying equipment
    for military use, are subject to various risks, including,
    without limitation, dependence on US and foreign government
    appropriations and program allocations, the competition for
    available military business, and government termination of
    orders for convenience.
We believe that most of the monocular Video Eyewear products
    offered by our competitors are inferior to ours because they are
    bulky, have small image sizes with poor optics
and/or
are
    currently priced higher than our products.
Competition —
    Low-Vision Assist
The majority of competitors in the low-vision assist market
    offer magnification systems that consist of a large desktop
    television or computer screen that displays a magnified version
    of an image captured by a hand scanner or stationary camera.
    Over 30 companies currently offer such vision tools. The
    largest providers are Enhanced Vision Inc. (Enhanced Vision)
    (which markets its product under the Merlin brand name),
    MagniSight, Inc., Optelec Holding B.V., REHAN Electronics Ltd.
    (which markets it product under the Affinity brand name),
    Beirley Associates, Inc., Telesensory Corporation and eSight
    Corporation. Although the products offered by these companies
    can provide effective low-vision assistance to many users, they
    are not mobile and they are often difficult to use. They
    generally require the user to sit in front of the large screen
    to view the image. Recently, some companies, including Enhanced
    Vision, have introduced mobile digital magnifiers that include a
    camera and an integrated six-inch LCD screen. Enhanced
    Vision's product is marketed under the Amigo brand. We do
    not believe that any of these competitive products offers the
    flexibility of usage, portability and some of the advanced
    digital video signal processing capabilities of our LV920.
    Moreover, the utility of all of the other competitive tools is
    generally limited to reading, whereas the LV920, which employs a
    wearable camera and is mobile, can also be used for many other
    normal vision applications.
In the wearable low-vision assist market, our competitors are
    manufacturers of optical loops and head worn optical systems and
    one manufacturer of a digital magnifying system similar to our
    LV920. The optical loops are usually worn by dentists, doctors,
    and jewelry makers for their fine work, and have gained limited
    use in the low-vision assist market due to their lack of signal
    processing and image brightness issues. The competitive digital
    magnifier is manufactured by Enhanced Vision and is sold under
    the Jordy and Maxport brand names. While the Enhanced Vision
    product has been sold for several years now, its market
    penetration has been limited. We believe our low-vision assist
    product is more ergonomic and offers more advanced digital video
    signal processing techniques than those manufactured by Enhanced
    Vision.
Sales and
    Marketing
Sales
Our sales strategy is to introduce our products to the widest
    possible audience within our target markets. We focus today on
    the consumer and industrial and defense markets. Historically,
    most of our sales efforts were directed toward obtaining
    contracts to provide custom engineering solutions and products
    for the defense and industrial markets. However, in 2005, as our
    products and technology evolved, we began to also sell standard
    Video Eyewear products for the consumer markets. In fall 2008,
    we began offering products for the low-vision assist market.
We have separate marketing and sales strategies for each of our
    target markets. We have an internal sales force of five people.
    We regularly attend industry trade shows in our markets and have
    begun establishing some level of separate branding for both of
    our divisions. The consumer division sells under the Vuzix name
    and the industrial and defense division under the
    Tac-Eye
®
name.
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During the years 2008 and 2007, 63.8% and 67.6% of our sales
    were derived from providing goods and services to the US
    government, directly and indirectly. Of those amounts, 80.7% in
    fiscal 2008 and 20.7% in 2007 were derived from subcontracts
    with Kopin and DRS, and we are dependent upon continuing to be
    engaged as a subcontractor to them. We derived 35.4% of our
    sales from consumer Video Eyewear products in fiscal 2008 and
    32.4% and 21.2% in fiscal 2007 and 2006 respectively.
Marketing
Our marketing group is responsible for product management,
    planning, advertising, marketing communications, and public
    relations. We intend to become known as the premier supplier of
    Video Eyewear in the consumer markets, where our products are
    currently sold under the
    iWear
®
brand. We also intend to become known as the premier supplier of
    virtual display technology and systems for the industrial,
    defense, and low-vision assist markets. We employ public
    relations firms in both the United States and England and a
    marketing firm to help convey our message through brochures,
    packaging, tradeshow messaging and advertising campaigns. We
    plan to undertake specific marketing activities as needed,
    including, but not limited to:
•
product reviews, case studies and promotions in trade
    publications;
•
enhancement and maintenance of our Website;
•
Internet and web page advertising and targeted emails;
•
public relations, print advertising, catalogs and point of
    purchase displays
•
trade shows and sponsorships;
•
co-marketing relationships with relevant companies in selected
    markets; and
•
Internet awareness and outreach activities.
Industrial
    and Defense
We primarily solicit and manage our government/defense products
    and engineering services directly. We expect to continue to
    obtain business through marketing our existing reputation within
    the defense markets for quality, precision electronics for
    defense night vision and thermal weapons systems. We believe
    this market to be a relationship and "word of mouth"
    market in which large contracts are generally awarded only to
    those who have performed well on previous contracts. We employ,
    and expect to continue to employ, a Washington-based lobbying
    firm to help increase our visibility as a potential supplier in
    these markets and to assist us in uncovering new sales
    opportunities. We also act as a value added supplier, supplying
    our products to major defense suppliers, such as iRobot and DRS,
    to complement their products so that they can offer a complete
    turn-key solution to their potential defense customers. We are
    attempting to expand such partnerships and co-marketing
    agreements with government- and defense-focused value added
    resellers and system integrators, for our
    Tac-Eye
®
product lines. We market our products primarily through our own
    direct sales organization. Business is solicited from large
    industrial manufacturers and defense companies, the US
    government and foreign governments and major foreign electronic
    equipment companies. In certain countries we have and will use
    external sales representatives to help solicit and coordinate
    foreign contracts. We are also on the eligible list of
    contractors of many agencies of the US Department of Defense and
    may now be solicited by such agencies for procurement needs
    falling within the major classes of products we produce. We also
    search the various government contract offering sites for
    procurement programs in which we believe we are qualified to
    participate.
Consumer
We engage in a variety of marketing efforts that are intended to
    drive customers to our products and to grow awareness of our
    consumer products and Video Eyewear in general. Public relations
    is an important aspect of our
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marketing and we intend to continue to distribute samples of our
    products to key industry participants. We currently plan to
    focus our marketing efforts for the next 12 months on:
•
distinguishing the Video Eyewear product category from current
    competitors and legacy head mounted displays;
•
building consumer acceptance and momentum around the new Video
    Eyewear category;
•
creating awareness of the benefits of Video Eyewear as compared
    to existing technologies; and
•
creating brand awareness of the Vuzix,
    iWear
®
and
    Wrap
tm
brands.
Our Video Eyewear and VR Video Eyewear products are currently
    sold directly to consumers, through select specialty retailers,
    through catalogue offerings and through third party North
    American distributors including D&H and Wynit. Our products
    are currently sold by the following US based resellers: SkyMall,
    Brookstone, Hammacher Schlemmer, Amazon and Micro Center. Our
    website, www.vuzix.com is an important part of our direct sales
    efforts.
If our marketing efforts are successful and our sales volume
    increase we expect that most of our products will then be sold
    through the traditional consumer electronics and PC mass-market
    distribution channels and to a smaller extent from our current
    specialty retailers. Therefore, we intend to spend the majority
    of our marketing budget during this phase on website, direct
    sales support and on reseller incentives and support. For
    resellers with physical retail locations we began offering in
    the US, point of purchase systems that include a video frame
    running a slide show presentation on the products as well as an
    integrated fully functional Video Eyewear product that allows
    potential customers to use our products.
We may also explore and consider OEM and licensing relationships
    with manufacturing partners, consumer electronics firms, and
    mobile phone makers.
We intend to sell our products internationally through our
    growing network of international distributors. Our
    distributorships are being established on a country by country
    basis, where market size allows. Normally, we appoint two or
    more distributors in each area. However, in early 2009 we signed
    a letter of intent to negotiate a long-term exclusive
    distribution arrangement for the Chinese marketplace.
    Negotiations with the potential distributor are currently
    continuing and any definitive agreement will be subject to sales
    performance and volume requirements, along with an option to
    manufacture portions of our products under license directly in
    China for that marketplace only.
Our initial international focus was on Japan. In late 2007 we
    opened a branch sales and service office in Tokyo, staffed by
    two full-time personnel. In addition to supporting local
    resellers and distributors and providing end user customer
    support, we are seeking new sales channels and partnerships with
    software and hardware solution providers in Japan.
To serve the EU market, in spring 2008 we established a wholly
    owned subsidiary, Vuzix (Europe) Limited, through which to
    conduct our business. As of March 31, 2009 we had resellers
    in 23 countries that had placed orders with us in the last six
    months. While we do not currently maintain a European office, we
    have contracted with a third-party end user technical support
    firm and fulfillment center to service our customers in the EU.
    We have also retained a sales consultant (who acts as our
    European Director of Operations), a UK public relations firm and
    a mobile applications consultant to provide us with advice
    regarding the European cellular phone market.
Low-Vision
    Assist
We intend to market our low-vision assist products through
    low-vision clinics, catalogs and the Internet. Our research
    indicates that most low-vision sufferers visit a low-vision
    clinic after visiting a retinal specialist (of which there are
    approximately 2,000 in the United States) or after a low-vision
    examination at an optometrist or ophthalmologist. We intend to
    develop an awareness campaign aimed at retina specialists and to
    provide demonstration systems and brochures at low-vision
    clinics, which are the most common purchase point for low-vision
    assist products. An internal sales force and independent sales
    representatives will be used to sell our products through and to
    those clinics. We intend to test our products against other
    low-vision aids and publish the results in medical journals and
    present them at medical conventions. There are at least five
    major trade shows each
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year for retina specialists in North America and we intend to
    exhibit both our products and present the results of our testing
    at those shows.
Manufacturing
Currently, we purchase product components from our suppliers and
    perform the final assembly of our Video Eyewear products
    ourselves in our Rochester, New York facility. We are
    experienced in the successful production of our products in
    moderate volumes. We expect to continue to perform final
    assembly of our Video Eyewear products ourselves over the short
    term. However, if our assembly volume increases and cost
    effective third party sourcing becomes feasible, we anticipate
    that we will outsource the bulk of the final assembly, with the
    possible exception of certain critical optical and display
    components.
We currently purchase almost all of the microdisplays used in
    our products from Kopin and eMagin. Kopin accounts for
    approximately 95% of our microdisplays by unit volume. We
    estimate that products incorporating Kopin microdisplays will
    account for approximately 46% of our sales in 2009 and products
    incorporating eMagin microdisplays will account for
    approximately 20% of our sales in 2009. We procured increasing
    percentages of our microdisplays from other sources, but they
    are very limited currently. While we do not manufacture our
    components, we own the tooling that is used to make our custom
    components (with the exception of Apple iPod authentication
    chips and connectors that we acquire directly under license from
    Apple) and we do not believe that we are dependent on our
    relationships with any supplier in order to continue to operate
    our business effectively. Some of our accessory products, such
    as screen-less portable DVD players and mouse based camera
    systems are sourced from third parties as finished goods. We
    typically have them print our Vuzix brand name on the products.
    Such third party products represent less than 2% of our sales in
    2008.
We are committed to globally sourcing all our components to
    minimize product costs. We anticipate that procuring assembled
    products from third parties will result in decreased labor force
    requirements, capital equipment costs, component inventories,
    and the cost of maintaining inventories of work in progress. We
    generally procure components and products from our vendors on a
    purchase order basis without any long-term commitments. We
    currently use several Asian manufacturing sources, where we have
    located some of our tooling.
Employees
As of the date of this prospectus, we had 48 full-time
    employees in North America: eight in sales and marketing,
    distribution, and customer service; 16 in research and
    development and engineering services support; 16 in
    manufacturing, operations and purchasing; one in quality
    assurance; and seven in finance, management, and administration.
    We also work with a group of sub-contractors mainly for
    industrial, mechanical and optical design assistance in the
    Rochester, New York area, some of which have been continually
    contracted over the last 36 months. In Japan we have two
    full-time employees and in the UK we have one full-time
    contractor to manage our European sales and marketing activities.
Facilities
Our manufacturing facility, consisting of approximately
    8,800 square feet, is located at 2166 Brighton Henrietta
    Townline Road, Rochester, New York 14623, and our research and
    development, sales and administration offices, consisting of
    approximately 9,600 square feet, are located in two
    different suites at 75 Town Centre Drive, Rochester, New York
    14623. We currently pay approximately $65,000 per year in rent
    for our manufacturing facility and $110,000 per year for our
    research and development, sales and administration offices. The
    manufacturing facility is leased on a calendar year term and we
    expect to renew the lease on substantially the same terms prior
    to its expiration at the end of 2009. Our lease on one office
    suite expired in May 2009 and our lease on the other office
    suite expires in June 2010. We currently occupy the suite on
    which our lease expired on a month-to-month basis. We expect to
    renew that lease on substantially the same terms in the near
    future. We have an option to terminate the lease expiring in
    June 2010 earlier subject to payment of a termination fee.
We believe that each of our facilities is in good operating
    condition and will adequately serve our needs for at least the
    next 12 months. Subject to the successful completion of
    this offering, we intend to start re-consolidating our
    facilities. This will be done for efficiency reasons. We
    anticipate that, if required, suitable additional or
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alternative space would be available on commercially reasonable
    terms to accommodate expansion of our operations.
Legal
    Proceedings
As at the date of this prospectus, we are not a party to, and
    our property is not the subject of, any legal proceedings, we
    have not been a party to, and our property has not been the
    subject of, any such proceedings since our incorporation, and we
    are not aware of any such proceedings contemplated by or against
    us or our property.
There have been no penalties or sanctions imposed against us by
    a court relating to Canadian provincial and territorial
    securities legislation or by a Canadian securities regulatory
    authority within the three years immediately preceding the date
    of this prospectus.
There have been no penalties or sanctions imposed by a court or
    regulatory body against us that are necessary to be described
    herein for the prospectus to contain full, true and plain
    disclosure of all material facts relating to the securities
    being distributed, nor have we entered into any settlement
    agreements before a court relating to Canadian provincial and
    territorial securities legislation within the three years
    immediately preceding the date of this prospectus.
History
We were incorporated in Delaware in 1997 as VR Acquisition Corp.
    In 1997, we acquired substantially all of the assets of Forte
    Technologies, Inc. (Forte), which was engaged in the manufacture
    and sale of virtual reality headsets and the development of
    related technologies. It was originally owned and controlled by
    Kopin, our main current microdisplay supplier. Most of the
    technologies developed by Forte are now owned and used by us.
Thereafter in 1997 we changed our name to Kaotech Corporation.
    In 1998 we changed our name to Interactive Imaging Systems, Inc.
    In 2004 we changed our name to Vicuity Corporation and then to
    Icuiti Corporation. In 2007, we changed to our current name,
    Vuzix Corporation. None of these name changes were the result of
    a change in our ownership control.
Our corporate offices are located at 75 Town Centre Drive,
    Rochester, New York 14623. Our phone number is
(585) 359-5900.
The URL for our website is www.vuzix.com. The information
    contained on, connected to or that can be accessed via our
    website is not part of this prospectus. We have included our
    website address in this prospectus as an inactive textual
    reference only and not as an active hyperlink.
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MANAGEMENT
Executive
    Officers, Key Employees, Directors and Director
    Nominees
Below are the names, ages and positions held with us of our
    executive officers, key employees, directors and directors elect.
Name
Age
Position(s)
Paul J. Travers
47
CEO, President and Director
Grant Russell
56
CFO, Executive Vice President and Director
Vincent J. Ferrer
37
Director of Engineering
Paul Churnetski
61
Vice President — Quality Assurance
Gary VanCamp
62
Vice President — Low-Vision Assist Products
Steven D. Ward
48
Controller
Stephen J. Glaser
37
Vice President — Sales & Marketing —
    Defense
Mike Hallett
36
Director Sales — Consumer
Peter Artz
40
Director of Manufacturing
William Lee
56
Director
Frank Zammataro
51
Director Elect
Kathryn Sayko
42
Director Elect
Bernard Perrine
46
Director Elect
Executive
    Officers
Paul J. Travers
was the founder of Vuzix and has served
    as our President and Chief Executive Officer since 1997 and as a
    member of our board of directors since November 1997. Prior to
    the formation of Vuzix, Mr. Travers founded both
e-Tek
Labs,
    Inc. and Forte Technologies Inc. He has been a driving force
    behind the development of our products for the consumer market.
    With more than 20 years experience in the consumer
    electronics field, and 13 years experience in the virtual
    reality and virtual display fields, he is a nationally
    recognized industry expert. He holds an Associate degree in
    engineering science from Canton, ATC and a Bachelor of Science
    degree in electrical and computer engineering from Clarkson
    University. Mr. Travers resides in Honeoye Falls, New York,
    United States.
Grant Russell
has served as our Chief Financial Officer
    since 2000 and as a member of our board of directors since April
    2009. From 1997 to 2004, Mr. Russell developed and
    subsequently sold a successful software firm and a new concept
    computer store and cyber café. In 1984, he
co-founded
Advanced Gravis Computer (Gravis), which, under his leadership
    as President, grew to become the world's largest PC and
    Macintosh joystick manufacturer with sales of $44 million
    worldwide and 220 employees. Gravis was listed on NASDAQ
    and the Toronto Stock Exchange. In September 1996 it was
    acquired by a US-based Fortune 100 company in a successful
    public tender offer. Mr. Russell holds a Bachelor of
    Commerce degree in finance from the University of British
    Columbia and is both a US Certified Public Accountant and a
    Canadian Chartered Accountant. Mr. Russell resides in
    Vancouver, British Columbia, Canada.
Key
    Employees
Paul J. Churnetski
— Mr. Churnetski held
    the position of Vice President of Manufacturing from November
    1997 to December 2005, when he became Vice President of Quality
    Assurance at Vuzix. Mr. Churnetski was also a member of our
    board of directors from November 1997 to August 2007. He was
    previously employed with medical manufacturers Fisons Corp. and
    Pennwalt Corp., where he held senior positions in the areas of
    technical operations, quality assurance, manufacturing, and
    information technology. He holds a Bachelor of Science degree in
    chemistry and a Master of Science degree in physical chemistry
    from the State University of New York, College at Geneseo, and
    was previously certified as a Quality Engineer.
    Mr. Churnetski resides in Henrietta, New York, United
    States.
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Vincent J. Ferrer
has served as our Director of
    Engineering since September 2005. Mr. Ferrer is responsible
    for directing our research and development team as well as
    managing our intellectual property portfolio and regulatory
    affairs for markets served. From July 1993 to September 2005,
    Mr. Ferrer was an engineer and project manager at Belkin
    Components, Inc. Mr. Ferrer holds a Bachelor of Science
    degree in engineering from Rochester Institute of Technology.
    Mr. Ferrer resides in Pittsford, New York, United States.
Gary VanCamp
has been with us since March 2004 and has
    served as our Vice President — Low-vision Assist
    Products since August 2007. Prior to joining us,
    Mr. VanCamp was a Project Manager — World Wide
    Training (Sales and Marketing Department) at Intel Corporation
    from January 2000 through July 2003. His more than 25 years
    of electronics engineering, manufacturing, and project
    management experience includes project management, Vice
    President of Engineering positions and extensive hardware design
    and development experience. Mr. VanCamp holds a Bachelor of
    Science degree in electrical/electronics engineering from
    Rochester Institute of Technology. Mr. VanCamp resides in
    Rochester, New York, United States.
Steven D. Ward
has served as our Controller since January
    1998. Mr. Ward, a Certified Public Accountant, is
    responsible for all of our accounting and human resource
    services. Mr. Ward's previous experience includes
    positions as Controller/Tax Manager for AM&M Companies, a
    financial services firm, and as a principal in a regional
    certified public accounting firm. Mr. Ward holds a Bachelor
    of Science degree in accounting from the State University of New
    York, College at Fredonia. Mr. Ward resides in Rochester,
    New York, United States.
Stephen J. Glaser
has served as our Vice President
    Sales & Marketing — Defense and Industrial
    since January 2000. Prior to joining Vuzix, Mr. Glaser
    worked in sales with Johnson & Johnson.
    Mr. Glaser holds a Bachelor of Science degree in marketing
    and business administration from State University of New York,
    Empire State College. Mr. Glaser resides in Pittsford, New
    York, United States.
Michael Hallett
has been with us since May 2005 and has
    served as our Director of Sales — Consumer since
    October 2008. From June 2004 to May 2005, Mr. Hallett was a
    sales manager at Wards Natural Science. Prior to that position,
    Mr. Hallett had sales potions at Unisys Corporation and
    Paychex, Inc. Mr. Hallett holds a Bachelor of Science
    degree in business administration with a concentration in
    marketing and a minor in economics from the State University of
    New York, College at Brockport. Mr. Hallett resides in
    Canandaigua, New York, United States.
Peter Artz
has been with us since February 2005 and has
    served as our Director of Manufacturing since October 2006.
    Mr. Artz is responsible for directing our Production,
    Manufacturing Engineering and Purchasing activities. Prior to
    joining Vuzix, Mr. Artz was with PSC Inc. for eight years
    as a Senior Manufacturing Engineer, developing laser barcode
    scanners. Mr. Artz holds a Bachelor of Science degree in
    manufacturing engineering from Rochester Institute of
    Technology. Mr. Artz resides in Penfield, New York, United
    States.
Director
William Lee
has served as a member of our board of
    directors since June 2009. Mr. Lee has been self-employed
    as a financial consultant since May 2008. From January 2006 to
    May 2008, he served as Chief Financial Officer of Jinshan Gold
    Mines Inc., a mining company listed on the Toronto Stock
    Exchange. From July 2004 to December 2005, he was engaged as a
    business analyst for Ivanhoe Energy Inc., a Toronto Stock
    Exchange and NASDAQ-listed company, and Ivanhoe Mines Ltd.
    Vancouver, an independent international heavy oil development
    and production company with operations in Canada, the United
    States, China, and Ecuador and listed on the New York and
    Toronto Stock Exchanges. Mr. Lee spent nine years engaged
    in the practice of public accounting with the firm of
    Deloitte & Touche. Mr. Lee is a member of the
    Institute of Chartered Accountants of British Columbia and holds
    a Bachelor of Commerce degree from the University of British
    Columbia. Mr. Lee also currently serves as a director of
    Tinka Resources Ltd., Halo Resources Ltd., both of which are
    listed on the
TSX-V,
and
    Golden Peaks Resources Ltd., which is listed on the TSX.
    Mr. Lee resides in Delta, British Columbia, Canada.
Directors
    Elect
Frank Zammataro
has been elected, and has agreed to
    serve, as a member of our board of directors upon the
    effectiveness of the registration statement of which this
    prospectus forms a part. Mr. Zammataro is the President of
    Rentricity, Inc., a privately held, renewable energy company
    which he founded in 2003. Prior to founding that
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business, Mr. Zammataro served as Chief Marketing Officer
    of w-Technologies, Inc., a wireless solutions
start-up
which provided a software platform and applications framework
    for companies developing consumer-based wireless services. From
    1979 through 2000, he was employed by Merrill Lynch, Pierce,
    Fenner & Smith Inc., where in his last position he led
    the Internet-related market and services development activities.
    He holds a Bachelor of Arts degree in communications arts and
    political science from St. John's University and is a
    graduate of the Executive Management Program of the Wharton
    School of the University of Pennsylvania. Mr. Zammataro
    resides in Chatham, New Jersey, United States.
Kathryn Sayko
has been elected, and has agreed to serve,
    as a member of our board of directors upon the effectiveness of
    the registration statement of which this prospectus forms a
    part. Ms. Sayko is a Managing Director of J.P. Morgan,
    Inc., most recently serving as its Head of North East Middle
    Market Investment Banking Coverage. Ms. Sayko has been
    employed by J.P. Morgan since 1993. She holds a Bachelor of
    Business Administration degree from James Madison University
    School of Business and a Master of Business Administration
    degree from New York University, Stern School of Business.
    Ms. Sayko resides in New York City, New York, United States.
Bernard Perrine
has been elected, and has agreed to
    serve, as a member of our board of directors upon the
    effectiveness of the registration statement of which this
    prospectus forms a part. Mr. Perrine, one of the founders
    of Kinko's Inc., has been self-employed as a business
    consultant since December 2007. From November 2006 through
    December 2007, Mr. Perrine served as Vice President
    — U.S. Sales and Marketing of Rexel, Inc., an
    electrical distribution company. From September 2005 through May
    2006, he served as Chief Executive Officer of Telezygology,
    Inc., a
start-up
provider of intelligent fastening technologies. From August 2004
    through September 2005, he was a Worldwide General Manager for
    Microsoft, Inc. Prior to August 2004, Mr. Perrine was
    Worldwide Vice President/General Manager, Digital &
    Film Imaging Systems for Eastman Kodak Co. He holds a Bachelor
    of Science degree in management from the University of Akron. He
    has also completed Executive Management courses at Harvard
    University and the University of Pennsylvania. Mr. Perrine
    resides in Lincolnshire, Illinois, United States.
Indebtedness
    of Directors and Executive Officers
As of the date of this prospectus, no amount is owed to us or
    any of our subsidiaries by any of our directors, directors elect
    or executive officers.
As of the date hereof and during the fiscal period ended
    December 31, 2008, there was no indebtedness owing to us in
    connection with the purchase of securities or other indebtedness
    by any of our current or former executive officers, directors or
    employees except as described below under the "Related
    Party Transactions — Officer Loan."
No individual who is, or at any time during our most recent
    completed fiscal year was, a director or officer of our company,
    none of our directors elect, or any associate of any one of them
    is, or at any time since the beginning of our most recent
    completed fiscal year has been, indebted to us (other than in
    respect of amounts which would constitute routine indebtedness)
    or was indebted to another entity, which such indebtedness is,
    or was at any time during our most recent completed fiscal year,
    the subject of a guarantee, support agreement, letter of credit
    or other similar arrangement or understanding provided by us
    except as described below under the "Related Party
    Transactions — Officer Loan."
Family
    Relationships
There is no family relationship between or among any of our
    directors, directors elect or executive officers.
Involvement
    in Certain Legal Proceedings
During the past five years, none of our directors, directors
    elect, executive officers, promoters or control persons has:
    (1) filed a petition under the federal bankruptcy laws or
    any state insolvency law, nor had a receiver, fiscal agent or
    similar officer appointed by a court for the business or present
    of such a person, or any partnership in which he was a general
    partner at or within two yeas before the time of such filing, or
    any corporation or business association of which he was an
    executive officer within two years before the time of such
    filing; (2) was convicted in a criminal proceeding or named
    subject of a pending criminal proceeding (excluding traffic
    violations and other minor offenses); (3) was the subject
    of any order, judgment or decree, not subsequently reversed,
    suspended or
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vacated, of any court of competent jurisdiction, permanently or
    temporarily enjoining him from or otherwise limiting the
    following activities: (i) acting as a futures commission
    merchant, introducing broker, commodity trading advisor,
    commodity pool operator, floor broker, leverage transaction
    merchant, associated person of any of the foregoing, or as an
    investment advisor, underwriter, broker or dealer in securities,
    or as an affiliated person, director of any investment company,
    or engaging in or continuing any conduct or practice in
    connection with such activity; (ii) engaging in any type of
    business practice; (iii) engaging in any activity in
    connection with the purchase or sale of any security or
    commodity or in connection with any violation of federal or
    state securities laws or federal commodity laws; (4) was
    the subject of any order, judgment or decree, not subsequently
    reversed, suspended or vacated, of any federal or state
    authority barring, suspending or otherwise limiting for more
    than 60 days the right of such person to engage in any
    activity described in clause (3) above, or to be associated
    with persons engaged in any such activity; (5) was found by
    a court of competent jurisdiction in a civil action or by the
    SEC to have violated any federal or state securities law and the
    judgment in subsequently reversed, suspended or vacate; or
    (6) was found by a court of competent jurisdiction in a
    civil action or by the Commodity Futures Trading Commission
    (CFTC) to have violated any federal commodities law, and the
    judgment in such civil action or finding by the CFTC has not
    been subsequently reversed, suspended or vacated.
Cease
    Trade Orders, Bankruptcies and Penalties and Sanctions
None of our directors, directors elect, officers or control
    persons is, or within the ten years prior to the date of this
    prospectus has been, (a) a director, chief executive
    officer or chief financial officer of any issuer (including us)
    that, (i) was subject to an order that was issued while
    that person was acting in the capacity as director, chief
    executive officer or chief financial officer, or (ii) was
    subject to an order that was issued after that person ceased to
    be a director, chief executive officer or chief financial
    officer and which resulted from an event that occurred while
    that person was acting in the capacity as director, chief
    executive officer or chief financial officer; or (b) a
    director or executive officer of any company (including us)
    that, while that person was acting in that capacity, or within a
    year of that person ceasing to act in that capacity, became
    bankrupt, made a proposal under any legislation relating to
    bankruptcy or insolvency or was subject to or instituted any
    proceedings, arrangement or compromise with creditors or had a
    receiver, receiver manager or trustee appointed to hold its
    assets. For the purposes of this paragraph, "order"
    means a cease trade order, an order similar to a cease trade
    order or an order that denied the relevant company access to any
    exemption under securities legislation, in each case that was in
    effect for a period of more than 30 consecutive days.
None of our directors, directors elect, officers or control
    persons has been subject to any penalties or sanctions imposed
    by a court relating to securities legislation or by a securities
    regulatory authority or has entered into a settlement agreement
    with a securities regulatory authority or has been subject to
    any other penalties or sanctions imposed by a court or
    regulatory body which would be important to a reasonable
    investor making an investment decision.
None of our directors, directors elect, officers or control
    persons (or a personal holding company of any such person) is,
    or within the ten years prior to the date of this prospectus has
    become, bankrupt, made a proposal under any legislation relating
    to bankruptcy or insolvency or has been subject to or instituted
    any proceedings, arrangement or compromise with creditors, or
    had a receiver, receiver manager or trustee appointed to hold
    his assets.
Conflicts
    of Interest
Certain of our proposed directors are also directors of other
    public companies and our existing and proposed directors and
    officers are or may be shareholders of other public companies.
    Accordingly, conflicts of interest may arise between such
    persons' duties as directors and officers of Vuzix and
    their positions as directors and shareholders of such other
    companies. All such possible conflicts are required to be
    disclosed in accordance with the requirements of applicable
    corporate law and the directors and officers are required to act
    in accordance with the obligations imposed on them by law.
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EXECUTIVE
    COMPENSATION
Summary
    Compensation Table
The following table sets forth information for the fiscal years
    ended December 31, 2008 and 2007 concerning compensation of
    (i) the one individual serving as our principal executive
    officer during the fiscal year ended December 31, 2008 and
    (ii) the one individual serving as our principal financial
    officer during the fiscal year ended December 31, 2008
    (collectively, the "named executive officers"):
SUMMARY
    COMPENSATION TABLE
Stock
All Other
Salary
Bonus
Awards
Compensation
Total
Name and Principal Position
Year
($)
($)
($)
($)
($)
Paul J. Travers, President and
2008
$
200,000
—
—
—
$
200,000
Chief Executive Officer
2007
$
142,460
—
—
—
$
142,460
Grant Russell, Chief Financial
2008
$
175,000
—
—
$
24,571
(1)
$
199,571
Officer & Executive Vice President
2007
$
127,407
—
—
$
23,309
(1)
$
150,716
(1)
Consists of amounts paid to Mr. Russell as a reimbursement
    for the rental of an automobile and direct travel to and from
    his residence in Vancouver, Canada to Rochester.
Employment
    Agreements
Paul
    J. Travers
On August 1, 2007, we entered into an employment agreement
    with Paul J. Travers providing for his continued service as our
    Chief Executive Officer and President. Under the agreement,
    Mr. Travers is entitled to an initial annual base salary of
    $200,000, subject to increases in the sole discretion of the
    board of directors, and upon the initial public offering of
    common stock an annual base salary of $300,000 or such greater
    amount as shall be determined by the board of directors. He is
    also eligible to receive such periodic, annual or other bonuses
    as the board of directors in its sole discretion shall determine
    and to participate in all bonus plans established for our senior
    executives. The agreement also provides that Mr. Travers
    may be awarded, in the sole discretion of the board of
    directors, stock options and other awards under any plan or
    arrangement for which our senior executives are eligible. The
    level of his participation in any such plan or arrangement shall
    be determined by the board of directors in its sole discretion.
    To the greatest extent permissible under the Internal Revenue
    Code (the Code) and the regulations thereunder, options granted
    to Mr. Travers shall be incentive stock options within the
    meaning Section 422 of the Code. He is also eligible to
    participate in all employee benefit plans which are generally
    available to our senior executives and entitled to receive
    fringe benefits and perquisites comparable to those of our other
    senior executives.
Mr. Travers' employment under the agreement shall
    continue indefinitely until terminated by him or by us. In the
    event that his employment is terminated by us other than for
    "cause" (as defined in the agreement), by him for
    "good reason" (as defined in the agreement) or upon
    his death or "disability" (as defined in the
    agreement), Mr. Travers shall be entitled to be paid, in
    addition to any base salary and bonuses then accrued and unpaid,
    and his then current base salary for 24 months after the
    date of termination and the entire bonus that would have been
    payable pursuant to any agreement, understanding, arrangement or
    plan in which he is entitled to participate for the year in
    which the termination of his employment occurred as if he had
    been employed for the entire year, provided that, in the opinion
    of the board of directors, he is likely to have met any bonus
    plan goals for the relevant period had he not been terminated.
    As a condition to our obligation to make any such payment, we,
    in our sole discretion, may require Mr. Travers to release
    us and our officers, directors, employees, and agents, from any
    and all claims and causes of action, including, but not limited
    to those arising from his employment and the termination of his
    employment. In the event of such termination, all stock options,
    restricted stock grants, stock appreciation rights and other
    similar awards held by Mr. Travers at the date of
    termination shall immediately vest, the period during which any
    options or rights relating to such grants may be exercised shall
    be the longer of the date specified in such
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grants or the date that is thirty (30) days after the end
    of the
24-month
period following the date of termination and will, in all other
    respects, continue to be governed by, and continued in
    accordance with, their applicable plan and grant documents. In
    the event that Mr. Travers's employment is terminated
    by us for cause or by him other than for good reason,
    Mr. Travers shall be entitled to be paid only any base
    salary then accrued and unpaid and annual bonus amounts for any
    fiscal year completed prior to the date of termination and we
    shall have no further obligations to him.
In the event of a "change of control" (as defined in
    the agreement), any unvested stock options held by
    Mr. Travers shall be fully vested and become immediately
    exercisable. Such options shall remain exercisable for the
    period remaining under the relevant stock option agreement and
    shall not have a shortened period of exercisability as a result
    of the change of control, except for statutory stock options
    which shall, at Mr. Travers's election,
    (i) expire 90 days after his termination (or one year
    after his termination upon his death or permanent and total
    disability) or (ii) be converted into non-qualified stock
    options expiring at the end of the entire term of such option
    under the relevant stock option agreement. Additionally, if
    Mr. Travers is terminated within one year of a change of
    control for any reason other than by us for cause, or if he
    elects to terminate his employment (whether or not for good
    reason) after the expiration of 120 days after and on or
    before the two-year anniversary of a change of control,
    Mr. Travers shall be entitled to be paid, in addition to
    any base salary and bonuses then accrued and unpaid, and his
    then current base salary for 48 months after the date of
    termination and the entire bonus that would have been payable
    pursuant to any agreement, understanding, arrangement or plan in
    which he is entitled to participate for the year in which the
    termination of his employment occurred as if he had been
    employed for the entire year, provided that, in the opinion of
    the board of directors, he is likely to have met any bonus plan
    goals for the relevant period had he not been terminated.
Under his agreement, we are obligated to reimburse
    Mr. Travers for the costs of an automobile at the rate of
    $750 per month and for all actual, reasonable and customary
    expenses incurred in the course of his employment in accordance
    with our policies as then in effect. Mr. Travers is subject
    to certain restrictive covenants under the agreement, including
    a covenant not to compete for 24 months after his
    termination for any reason other than by him for good reason or
    by us without cause and for 48 months after his termination
    if such termination results in our obligation to pay him the
    change of control payment described above.
Grant
    Russell
On August 1, 2007, we entered into an employment agreement
    with Grant Russell providing for his continued service as our
    Chief Financial Officer and Executive Vice President. Under the
    agreement, Mr. Russell is entitled to an initial annual
    base salary of $175,000, subject to increases in the sole
    discretion of the board of directors, and upon the initial
    public offering of common stock an annual base salary of
    $275,000 or such greater amount as shall be determined by the
    board of directors. He is also eligible to receive such
    periodic, annual or other bonuses as the board of directors in
    its sole discretion shall determine and to participate in all
    bonus plans established for our senior executives. The agreement
    also provides that Mr. Russell may be awarded, in the sole
    discretion of the board of directors, stock options and other
    awards under any plan or arrangement for which our senior
    executives are eligible. The level of his participation in any
    such plan or arrangement shall be determined by the board of
    directors in its sole discretion. To the greatest extent
    permissible under the Code and the regulations thereunder,
    options granted to Mr. Russell shall be incentive stock
    options within the meaning of Section 422 of the Code. He
    is also eligible to participate in all employee benefit plans
    which are generally available to our senior executives and
    entitled to receive fringe benefits and perquisites comparable
    to those of our other senior executives.
Mr. Russell's employment under the agreement shall
    continue indefinitely until terminated by him or by us. In the
    event that his employment is terminated by us other than for
    "cause" (as defined in the agreement), by him for
    "good reason" (as defined in the agreement) or upon
    his death or "disability" (as defined in the
    agreement), Mr. Russell shall be entitled to be paid, in
    addition to any base salary and bonuses then accrued and unpaid,
    and his then current base salary for 24 months after the
    date of termination and the entire bonus that would have been
    payable pursuant to any agreement, understanding, arrangement or
    plan in which he is entitled to participate for the year in
    which the termination of his employment occurred as if he had
    been employed for the entire year, provided that, in the opinion
    of the board of directors, he is likely to have met any bonus
    plan goals for the relevant period had he not been terminated.
    As a condition to our obligation to make any such payment, we,
    in our sole discretion, may
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require Mr. Russell to release us and our officers,
    directors, employees, and agents, from any and all claims and
    causes of action, including, but not limited to those arising
    from his employment and the termination of his employment. In
    the event of such termination, all stock options, restricted
    stock grants, stock appreciation rights and other similar awards
    held by Mr. Russell at the date of termination shall
    immediately vest, the period during which any options or rights
    relating to such grants may be exercised shall be the longer of
    the date specified in such grants or the date that is thirty
    (30) days after the end of the
24-month
period following the date of termination and will, in all other
    respects, continue to be governed by, and continued in
    accordance with, their applicable plan and grant documents. In
    the event that Mr. Russell's employment is terminated
    by us for cause or by him other than for good reason,
    Mr. Russell shall be entitled to be paid only any base
    salary then accrued and unpaid and annual bonus amounts for any
    fiscal year completed prior to the date of termination and we
    shall have no further obligations to him.
In the event of a "change of control" (as defined in
    the agreement), any unvested stock options held by
    Mr. Russell shall be fully vested and become immediately
    exercisable. Such options shall remain exercisable for the
    period remaining under the relevant stock option agreement and
    shall not have a shortened period of exercisability as a result
    of the change of control, except for statutory stock options
    which shall, at Mr. Russell's election,
    (i) expire 90 days after his termination (or
    1 year after his termination upon his death or permanent
    and total disability) or (ii) be converted into
    non-qualified stock options expiring at the end of the entire
    term of such option under the relevant stock option agreement.
    Additionally, if Mr. Russell is terminated within one year
    of a change of control for any reason other than by us for
    cause, or if he elects to terminate his employment (whether or
    not for good reason) after the expiration of 120 days after
    and on or before the two-year anniversary of a change of
    control, Mr. Russell shall be entitled to be paid, in
    addition to any base salary and bonuses then accrued and unpaid,
    and his then current base salary for 48 months after the
    date of termination and the entire bonus that would have been
    payable pursuant to any agreement, understanding, arrangement or
    plan in which he is entitled to participate for the year in
    which the termination of his employment occurred as if he had
    been employed for the entire year, provided that, in the
    opinion of the board of directors, he is likely to have met
    any bonus plan goals for the relevant period had he not been
    terminated.
Under his agreement, we are obligated to either reimburse
    Mr. Russell for the costs of an automobile at the rate of
    $750 per month or to bear all expenses associated with his lease
    of an automobile for his use while in Rochester, New York and to
    reimburse him for all actual, reasonable and customary expenses
    incurred in the course of his employment in accordance with our
    policies as then in effect. Mr. Russell is subject to
    certain restrictive covenants under the agreement, including a
    covenant not to compete for 24 months after his termination for
    any reason other than by him for good reason or by us without
    cause and for 48 months after his termination if such
    termination results in our obligation to pay him the change of
    control payment described above.
2007
    Amended and Restated Stock Option Plan
Our stock option plan was originally adopted by our board of
    directors and approved by our stockholders in October 1997. Our
    board of directors adopted and our stockholders approved the
    adoption of the amendment and restatement of our 1997 plan in
    August 2007. Throughout this prospectus we refer to the plan as
    amended and restated as our 2007 option plan. An aggregate of
    45,714,288 shares of our common stock are reserved for
    issuance under the 2007 option plan. Our board of directors has
    determined that, upon the effectiveness of the registration
    statement of which this prospectus forms a part, no further
    options will be granted under our 2007 option plan.
Shares Available for Awards.
As of the date of
    this prospectus, we had issued 2,876,263 shares of our
    common stock upon the exercise of options granted under the 2007
    option plan, options to purchase 15,304,554 shares of
    common stock had been issued and were outstanding under the plan
    and 27,533,471 shares of common stock remained available
    for issuance under the plan. Our board of directors has
    determined that, upon the effectiveness of the registration
    statement of which this prospectus forms a part, no further
    options will be granted under our 2007 option plan.
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Eligibility.
Only our employees, our
    directors, our consultants and other key persons are eligible to
    participate in our 2007 option plan. We may grant incentive
    stock options only to employees.
Administration.
Our board of directors
    administers the 2007 option plan. Our board, however, may
    delegate this authority to a committee of one or more directors.
    The party administering our 2007 option plan, whether it is our
    board of directors or a committee appointed by our board of
    directors, is referred to under the 2009 option plan as the
    "committee". Subject to the provisions of the 2007
    option plan and the rules of any stock exchange on which shares
    of our common stock may be listed, the committee has complete
    authority to interpret the 2007 option plan, to prescribe, amend
    and rescind rules and regulations relating to it, to determine
    who will receive stock options, to determine the terms and
    provisions of the respective option agreements (which need not
    be identical), and to make all other determinations necessary or
    advisable for the administration of the 2007 option plan.
Stock Options.
We grant incentive and
    nonstatutory stock options under the plan pursuant to incentive
    and nonstatutory stock option agreements. The committee
    determines who will receive stock options, whether the stock
    options will be incentive or nonstatutory stock options, and the
    number of stock options to be granted. The committee determines
    the exercise price for a stock option, consistent with the terms
    and conditions of the 2007 plan and applicable law. The
    exercise price of any incentive stock option cannot be less than
    100% of the fair market value of our common stock on the date of
    grant. Under the 2007 option plan, "fair market value"
    means the value of a share of the Company's common stock on
    any date as determined by the committee. The exercise price for
    stock options shall be paid in the form of cash or certified or
    bank check, or consideration received by us under a cashless
    exercise program if implemented by us in connection with the
    2007 option plan and if permitted by the rules of any stock
    exchange on which shares of our common stock may be listed.
    Options granted under the 2007 option plan vest at the rate
    determined by the committee and specified in each stock option
    agreement. The committee determines the term of stock options
    granted under the 2007 option plan, which can be up to ten
    years, except in the case of certain incentive stock options,
    which may have a term of up to five years. Unless an option
    agreement provides otherwise, if an optionee's employment
    with the Company is terminated for any reason, whether voluntary
    or otherwise, the optionee, or his or her beneficiary, may
    exercise any vested options for a period of 30 days from
    the date of termination of service. An optionee may not exercise
    an option beyond the expiration of its term.
Adjustment of Shares.
In the event that we
    have a specified type of change in our capital structure, such
    as, a stock split, stock dividend, recapitalization, spin-off,
    reclassification or similar occurrence, then the committee must
    appropriately adjust the number of shares reserved under the
    2007 option plan, as well as the numbers of shares covered by
    each outstanding award and the exercise prices or purchase
    prices, if applicable, of all outstanding stock awards under the
    2007 option plan.
Consolidation or Merger.
In the event of any
    consolidation or merger of the Company with or into another
    company or in case of any sale or conveyance to another company
    or entity of the property of the Company as a whole or
    substantially as a whole, shares of stock or other securities
    equivalent in kind and value to those shares and other
    securities an optionee would have received if he or she had held
    the full number of shares of common stock remaining subject to
    the option immediately prior to such consolidation, merger, sale
    or conveyance and had continued to hold those shares (together
    with all other shares, stock and securities thereafter issued in
    respect thereof) to the time of the exercise of the option shall
    thereupon be subject to the option. However, unless any option
    agreement shall provide different or additional terms, in any
    such transaction the committee, in its discretion, may provide
    instead that any outstanding option shall terminate, to the
    extent not exercised by the optionee prior to termination,
    either (a) at the close of a period of not less than ten
    (10) days specified by the committee and commencing on the
    committee's delivery of written notice to the optionee of
    its decision to terminate such option without payment of
    consideration as provided in the following clause or (b) as
    of the date of the transaction, in consideration of the
    Company's payment to the optionee of an amount of cash
    equal to the difference between the aggregate fair market value
    of the shares of common stock for which the option is then
    exercisable and the aggregate exercise price for such shares
    under the option.
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Other Terms.
Whenever shares are to be issued
    in satisfaction of an option granted under our 2007 option plan,
    the Company shall have the right to require the optionee to
    remit to the Company an amount sufficient to satisfy federal,
    state, local or other withholding tax requirements if and to the
    extent required by law (whether so required to secure for the
    Company an otherwise available tax deduction or otherwise) prior
    to the delivery of any certificate or certificates for such
    shares. An optionee may not transfer a stock option granted
    under our 2007 option plan other than by will or the laws of
    descent and distribution, and each option is exercisable, during
    the lifetime of the optionee, only by the optionee. Shares
    issued upon exercise of an option may be subject to forfeiture
    conditions, rights of repurchase, rights of first refusal and
    other transfer restrictions as determined by the committee and
    as set forth in the stock option agreement.
Amendment and Termination.
Subject to
    compliance with the rules of any stock exchange on which shares
    of our common stock may be listed, the 2007 option plan may be
    amended, altered, suspended or terminated by our board of
    directors at any time. We may not alter the rights and
    obligations under any option granted before amendment of the
    2007 option plan without the written consent of the affected
    optionee. Our board of directors has determined that, upon the
    effectiveness of the registration statement of which this
    prospectus forms a part, no further options will be granted
    under our 2007 option plan.
2009
    Stock Plan
Our 2009 stock plan has been approved by our board of directors
    and stockholders and will become effective as of the time the
    registration statement of which this prospectus forms is
    declared effective by the SEC. An aggregate of
    30,000,000 shares of our common stock are reserved for
    issuance under the 2009 option plan. As of the date of this
    prospectus, no options or other awards have been granted under
    our 2009 option plan.
Shares Available for Awards.
The total number
    of shares of our common stock that may be subject to awards
    under our 2009 option plan is 30,000,000 shares, plus the
    number of shares with respect to which awards previously granted
    thereunder are forfeited, expire, terminate without being
    exercised or are settled with property other than shares, and
    the number of shares that are surrendered in payment of any
    awards or any tax withholding requirements.
Eligibility.
The persons eligible to receive
    awards under our 2009 option plan are our officers, directors,
    employees and independent contractors who render consulting or
    advisory services to us and those of our subsidiaries. An
    employee on leave of absence may be considered as still in our
    employ or in the employ of one of our subsidiaries for purposes
    of eligibility for participation in our 2009 option plan.
Administration.
Our 2009 option plan provides
    that it shall be administered by our board of directors or a
    committee appointed by our board of directors, which committee
    shall be constituted to comply with applicable laws. The party
    administering our 2009 option plan, whether it is our board of
    directors or a committee appointed by our board of directors, is
    referred to under the 2009 option plan as the
    "administrator". Subject to the terms of our 2009
    option plan, the administrator is authorized to select eligible
    persons to receive awards, determine the type and number of
    awards to be granted and the number of shares of our common
    stock to which awards will relate, specify times at which awards
    will be exercisable or settleable (including performance
    conditions that may be required as a condition thereof), set
    other terms and conditions of awards, prescribe forms of award
    agreements, interpret and specify rules and regulations relating
    to our 2009 option plan and make all other determinations that
    may be necessary or advisable for the administration of our 2009
    option plan. Our board of directors has designated the
    compensation committee of the board to act as the administrator
    of our 2009 option plan.
Stock Options.
The administrator is authorized
    to grant stock options, including both incentive stock options
    or ISOs, which can result in potentially favorable tax treatment
    to the participant, and nonstatutory stock options. The exercise
    price per share subject to an option is determined by the
    administrator, but in the case of an ISO must not be less than
    the fair market value of a share of our common stock on the date
    of grant and in the case of a nonstatutory stock option must not
    be less than 85% of the fair market value of a share of our
    common stock on the date of grant provided that if stock options
    are granted within 90 days of a distribution by way of
    prospectus, the exercise price must not be less than the
    offering price under the prospectus. For purposes of our 2009
    option plan, the term "fair market value" means, as of
    any date, the value of our common stock determined as follows:
    (1) if our common stock is listed on any established stock
    exchange or a national market system, its fair market value
    shall be
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the closing sales price for such stock (or the closing bid, if
    no sales were reported) as quoted on such exchange or system on
    the day prior to the date of grant, as reported in The Wall
    Street Journal or such other source as the administrator deems
    reliable; (2) if our common stock is regularly quoted by a
    recognized securities dealer but selling prices are not
    reported, its fair market value shall be the mean between the
    high bid and low asked prices for our common stock on the day of
    determination; or (3) in the absence of an established
    market for our common stock, the fair market value thereof shall
    be determined in good faith by the administrator. The maximum
    term of each option, the times at which each option will be
    exercisable, and provisions requiring forfeiture of unexercised
    options at or following termination of employment or service
    generally are fixed by the administrator except that no option
    may have a term exceeding ten years. The exercise price for
    stock options shall be paid using such method of payment as
    shall be determined by the administrator, including, without
    limitation: (1) cash, (2) check, or (3) any
    combination of the foregoing methods of payment. Grants of stock
    options are subject to the limitation that, in any 12 month
    period, no individual may receive options to purchase shares of
    our common stock in excess of 5% of the number of shares of our
    common stock then outstanding and no individual who is a
    consultant or engaged in investor relations activities may
    receive options to purchase shares of our common stock in excess
    of 2% of the number of shares of our common stock then
    outstanding.
Stock Purchase Rights.
The administrator is
    authorized to grant stock purchase rights. A stock purchase
    right is an award that entitles the participant to purchase
    shares of our common stock. The terms, conditions, and
    restrictions related to grants of stock purchase rights are
    determined by the administrator, provided that all such terms,
    conditions, and restrictions must comply with the Delaware
    General Corporation Law and the requirements of any stock
    exchange on which shares of our common stock may be listed.
    Stock purchase rights are exercised by execution of a restricted
    stock purchase agreement in the form determined by the
    administrator.
Restricted Stock Units.
The administrator is
    authorized to grant restricted stock units. A restricted stock
    unit is an award that entitles the participant to receive shares
    of our common stock if certain vesting criteria are met. The
    vesting criteria and any other terms, conditions, and
    restrictions related to grants of restricted stock units are
    determined by the administrator.
Adjustment of Shares.
In the event that we
    have a specified type of change in our capital structure, such
    as a stock split, stock dividend, recapitalization, spin-off,
    reclassification or similar occurrence, then the administrator
    must appropriately adjust the number of shares reserved under
    the 2009 option plan, as well as the numbers of shares covered
    by each outstanding award and the exercise prices or purchase
    prices, if applicable, of all outstanding stock awards under the
    2009 option plan.
Other Terms of Awards.
The administrator may
    institute an exchange program which is a program under which
    (1) outstanding awards are surrendered or cancelled in
    exchange for awards of the same type (which may have lower
    exercise prices and different terms), awards of a different
    type,
and/or
cash,
and/or
(2) the exercise price of an outstanding award is reduced,
    but subject to such approvals as may be required by any stock
    exchange on which shares of our common stock may be listed. The
    terms and conditions of any exchange program will be determined
    by the administrator in its sole discretion. The administrator
    may to allow participants to satisfy withholding tax obligations
    by electing to have the Company withhold from the shares of our
    common stock to be issued upon exercise of an award that number
    of shares of common stock having a fair market value equal to
    the minimum amount required to be withheld. Awards may not be
    sold, pledged, assigned, hypothecated, transferred, or disposed
    of in any manner other than by will or the laws of descent and
    distribution, and may be exercised during the lifetime of the
    participant, only by the participant. Awards under our 2009
    option plan are generally granted without a requirement that the
    participant pay consideration in the form of cash or property
    for the grant (as distinguished from the exercise), except to
    the extent required by law. The administrator may, however,
    grant awards in exchange for other awards under our 2009 option
    plan awards or under our other plans, or other rights to payment
    from us, and may grant awards in addition to and in tandem with
    such other awards, rights or other awards.
Acceleration of Vesting; Change in
    Control.
The administrator may, in its
    discretion, but subject to such approvals as may be required by
    any stock exchange on which shares of our common stock may be
    listed, accelerate the exercisability, the lapsing of
    restrictions or the expiration of vesting periods of any award.
    In the event of a merger of the Company with or into another
    corporation, or a "change in control" of the Company,
    as defined in our 2009 option plan, each outstanding award shall
    be assumed or an equivalent award substituted by the successor
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corporation or a parent or subsidiary of the successor
    corporation. In the event that the successor corporation refuses
    to assume or substitute for the award, the participant will
    fully vest in and have the right to exercise all of his or her
    outstanding options and stock purchase rights, including shares
    of our common stock as to which such awards would not otherwise
    be vested or exercisable, all restrictions on restricted stock
    will lapse, and all outstanding restricted stock units will
    fully vest. In addition, the administrator may provide in an
    award agreement that the performance goals relating to any
    performance based award will be deemed to have been met upon the
    occurrence of any change in control.
Amendment and Termination.
Our board of
    directors may amend, alter, suspend, or terminate our
    2009 option plan at any time without further stockholder
    approval, except stockholder approval must be obtained for any
    amendment or alteration if such approval is required by law or
    regulation or under the rules of any stock exchange or quotation
    system on which shares of our common stock are then listed or
    quoted. Thus, stockholder approval may not necessarily be
    required for every amendment to our 2009 option plan which might
    increase the cost of our 2009 option plan or alter the
    eligibility of persons to receive awards. Stockholder approval
    will not be deemed to be required under laws or regulations,
    such as those relating to ISOs, that condition favorable
    treatment of participants on such approval, although our board
    of directors may, in its discretion, seek stockholder approval
    in any circumstance in which it deems such approval advisable.
    Unless earlier terminated by our board of directors, our 2009
    option plan shall continue in effect for a term of ten years
    from the later of (1) the effective date of our
    2009 option plan, or (2) the earlier of the most
    recent board of directors or stockholder approval of an increase
    in the number of shares of our common stock reserved for
    issuance under our 2009 option plan.
2009
    Non-Employee Directors' Stock Option Plan
Our 2009 Non-Employee Directors' Stock Option Plan has been
    approved by our board of directors and stockholders and will
    become effective as of the time the registration statement of
    which this prospectus forms is declared effective by the SEC.
    Throughout this prospectus we refer to the plan as our
    2009 directors' plan. An aggregate of
    7,000,000 shares of our common stock are reserved for
    issuance under the 2009 directors' plan. As of the
    date of this prospectus, no options or other awards have been
    granted under our 2009 directors' plan.
Shares Available for Awards.
The total number
    of shares of our common stock that may be subject to awards
    under our 2009 directors' plan is
    7,000,000 shares, plus the number of shares with respect to
    which awards previously granted thereunder are forfeited,
    expire, terminate without being exercised or are settled with
    property other than shares, and the number of shares that are
    surrendered in payment of any awards or any tax withholding
    requirements.
Eligibility.
The persons eligible to receive
    awards under our 2009 directors' plan are members of
    our board of directors who are not employed by us or any of our
    subsidiaries.
Administration.
Our 2009 directors'
    plan provides that it shall be administered by our board of
    directors and that the board of directors may not delegate
    administration of the plan to a committee. Subject to the terms
    of the plan, our board of directors is authorized to determine
    the provisions of each stock option granted pursuant to the
    2009 directors' plan and to construe and interpret the
    plan and stock options granted under it, and to establish, amend
    and revoke rules and regulations for its administration.
Stock Options.
Only nonstatutory stock options
    may be granted under the 2009 directors' plan.
    Furthermore, pursuant to the plan, options may only be granted
    to members of our board of directors who are not employed by us
    or any of our subsidiaries. The granting of nonstatutory stock
    options to our non-employee directors is non-discretionary and
    occurs automatically as follows: (1) (i) each person who is
    or becomes a non-employee director as of the effective date of
    the plan, and (ii) each person who, after the effective
    date, is elected or appointed for the first time to be a
    non-employee director automatically shall, upon the effective
    date or the date of his or her initial election or appointment
    to be a non-employee director, as applicable, be granted an
    "initial grant" to purchase 300,000 shares of our
    common stock; and (2) on the date of the annual meeting of
    our stockholders, each person who is elected as a non-employee
    director at that annual meeting (other than directors who have
    been elected directors for the first time at that annual meeting
    or have not served for at least 18 months), automatically
    shall receive an "annual grant" to purchase
    150,000 shares of our common stock on the terms and
    conditions set forth in the plan, provided, however, that the
    number of shares subject to an annual grant for a particular
    non-employee
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director shall be reduced, on a pro rata basis, for each month
    such person did not serve as a non-employee director during the
12-month
period from the prior annual grant date (or from the date of the
    closing of this offering with respect to the first annual grant
    hereunder) until the current annual grant date. One half of the
    shares of common stock covered by an initial grant shall vest
    immediately and the other one half shall vest monthly over
    12 months. The shares of common stock covered by an annual
    grant shall vest monthly over 12 months. The exercise price
    per share subject to an option shall be the fair market value of
    a share of our common stock on the date of grant provided that
    if stock options are granted within 90 days of a
    distribution by way of prospectus, the exercise price must not
    be less than the offering price under the prospectus. For
    purposes of our 2009 directors' plan, the term
    "fair market value" means, as of any date, the value
    of our common stock determined as follows: (1) if our
    common stock is listed on any established stock exchange or a
    national market system, its fair market value shall be the
    closing sales price for such stock (or the closing bid, if no
    sales were reported) as quoted on such exchange or system on the
    day prior to the date of grant, as reported in The Wall Street
    Journal or such other source as our board of directors deems
    reliable; or (2) in the absence of an established market
    for our common stock, the fair market value thereof shall be
    determined in good faith by the board of directors. No stock
    option shall be exercisable after the expiration of ten years
    from the date it was granted. The exercise price for stock
    options granted under our 2009 directors' plan shall
    be paid by (1) cash, (2) check or (3) any
    combination of the foregoing methods of payment. Stock options
    granted under the 2009 directors' plan shall terminate
    the earlier of three months (six months if the termination is a
    result of the option holder's disability (as defined in the
    2009 directors' plan) or 12 months if the
    termination is a result of the option holder's death)
    following the termination of an option holder's continuous
    service as a director or the expiration of the term of the stock
    option as set forth in the option holder's option agreement.
Adjustment of Shares.
In the event that we
    have a specified type of change in our capital structure, such
    as a stock split, stock dividend, recapitalization, spin-off,
    reclassification or similar occurrence, then the board of
    directors must appropriately adjust the number of shares
    reserved under the 2009 directors' plan, as well as
    the numbers of shares covered by each outstanding award and the
    exercise prices or purchase prices, if applicable, of all
    outstanding stock awards under the 2009 directors'
    plan.
Other Terms of Awards.
Option holders may
    satisfy withholding tax obligations by electing to have us
    withhold from the shares of our common stock to be issued upon
    exercise of an award that number of shares of common stock
    having a fair market value equal to the minimum amount required
    to be withheld. Stock options may not be sold, pledged,
    assigned, hypothecated, transferred, or disposed of in any
    manner other than by will or the laws of descent and
    distribution, and may be exercised during the lifetime of the
    participant, only by the participant. Upon exercise of any stock
    option , an option holder may not sell, dispose of, transfer,
    make any short sale of, grant any option for the purchase of, or
    enter into any hedging or similar transaction with the same
    economic effect as a sale, any shares of our common stock or our
    other securities held by the option holder, for a period of time
    specified by the managing underwriter (not to exceed one hundred
    eighty (180) days) following the effective date of any
    registration statement that we may file under the Securities
    Act, other than a
Form S-8
registration statement.
Early Exercise; Change in Control.
If
    permitted by the rules of any stock exchange on which shares of
    our common stock may be listed,
t
he board of directors
    may, in its discretion, give an option holder the right to
    exercise his or her option as to any part or all of the shares
    of our common stock subject to the stock option prior to full
    vesting of the stock option. In the event that we undergo a
    "change in control," as defined in our
    2009 directors' plan, and as of, or within
    12 months after, the effective time of such change in
    control, an option holder's continuous service with us or
    any of our subsidiaries terminates, then his or her stock
    options will accelerate and become fully vested and immediately
    exercisable, unless the termination was a result of the option
    holder's resignation (other than any resignation
    contemplated by the terms of the change in control or required
    by us or the acquiring entity pursuant to the change in
    control). Our 2009 directors' plan provides for a
    "reduced payment" (as defined in the plan) to an
    option holder in the event that the acceleration of the vesting
    and exercisability of the stock options provided for in
    subsection 11(c) of the plan and benefits otherwise payable to
    an option holder would (1) constitute a "parachute
    payment" within the meaning of Section 280G of the
    Code, and (2) but for this sentence, be subject to the
    excise tax imposed by Section 4999 of the Code
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Amendment and Termination.
Our board of
    directors may amend, alter, suspend, or terminate our
    2009 directors' plan at any time. However, except as
    provided in Section 11 of the plan relating to adjustments
    upon changes in our common stock, no amendment shall be
    effective unless approved by our stockholders to the extent
    stockholder approval is necessary to satisfy the requirements of
Rule 16b-3
or any
TSX-V
or other securities exchange listing requirements. The
    2009 directors' plan does not have a set termination
    date. Our board of directors may terminate the
    2009 directors' plan at any time.
Incentive
    Bonus Plan
Our board of directors has adopted an incentive bonus plan under
    which Paul J. Travers, our Chief Executive Officer and
    President, and Grant Russell, our Chief Financial Officer and
    Executive Vice President, may be awarded cash bonuses based upon
    increases in our sales and improvements in our profitability in
    2009 compared to 2008. Under the plan, Mr. Travers
    will be entitled to a cash bonus of 0.50% of his base salary for
    each 1.0% increase in our sales and Mr. Russell will be
    entitled to a cash bonus of 0.35% of his base salary for each
    1.0% increase in our sales, provided however, that no bonus
    shall be paid unless our sales increase by at least 20%, the
    amount paid for increases in our sales to Mr. Travers shall
    not exceed 100% of his base salary and the amount paid to
    Mr. Russell shall not exceed 70% of his base salary.
    Additionally, but only if our 2009 sales are equal to or greater
    than our 2008 sales, Mr. Travers and Mr. Russell
    will each be entitled to a bonus of 15% of their respective base
    salaries if our operating loss for 2009 is less than
    $1.0 million or a bonus of 30% of their respective base
    salaries if our operating income for 2009 is more than zero but
    less than 3% of our sales for 2009. If our operating income for
    2009 is more than 3% of our sales for 2009, Mr. Travers and
    Mr. Russell will each be entitled to an additional cash
    bonus based upon the our 2009 operating income as a percentage
    of our 2009 sales. In Mr. Traver's case, the bonus
    will be determined by multiplying his base salary by 10 times
    our 2009 operating income expressed as a percentage of our 2009
    sales. In Mr. Russell's case, the bonus will be
    determined by multiplying his base salary by 7.5 times our
    2009 operating income expressed as a percentage of our 2009
    sales. However, the amount paid to Mr. Travers shall not
    exceed 100% of his base salary and the amount paid to
    Mr. Russell shall not exceed 75% of his base salary.
Other
    Benefits
We believe establishing competitive benefit packages for our
    employees is an important factor in attracting and retaining
    highly qualified personnel. Executive officers are eligible to
    participate in all of our employee benefit plans, such as
    medical, dental, vision, group life and accidental death and
    dismemberment insurance and our 401(k) plan, in each case on the
    same basis as other employees. While our 401(k) plan does permit
    us to make discretionary contributions and matching
    contributions, subject to established limits and a vesting
    schedule, we have not made any discretionary or matching
    contributions to the plan on behalf of any participating
    employees since its inception in 2007.
Perquisites
In general, we do not provide significant perquisites to our
    employees. As a result, the cost to us of any perquisites is
    minimal. We reimburse our President and Chief Executive Officer
    and our Chief Financial Officer for the costs of an automobile
    at the rate of $750 per month. We also provide our Chief
    Financial Officer, whose primary residence is in Vancouver,
    British Columbia, the option to receive portions of his regular
    salary as a housing allowance at the rate prescribed by the
    Internal Revenue Service, for the maintenance of a part-time
    residence in Rochester, New York. Payment of such allowance is
    deductible by us for federal income tax purposes in the same
    manner as compensation. We also reimburse the costs of our Chief
    Financial Officer's flights that are direct to and from his
    residence in Vancouver Canada and Rochester, New York.
The board of directors or its compensation committee may at any
    time choose not to implement, amend, suspend, discontinue or
    terminate the annual incentive or profit sharing plan.
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Outstanding
    Equity Awards at Fiscal Year End
The following table sets forth information concerning
    exercisable and unexercisable options and stock awards that has
    not vested for each of the named executive officers that is
    outstanding as of December 31, 2008. We have not granted
    any stock awards.
OUTSTANDING
    EQUITY AWARDS AT FISCAL YEAR-END
Option Awards
Equity
Incentive Plan
Awards:
Number
Number of
Number of
of
Securities
Securities
Securities
Underlying
Underlying
Underlying
Unexercised
Unexercised
Unexercised
Option
Options
Options
Unearned
Exercise
Option
(#)
(#)
Options
Price
Expiration
Name
Exercisable
Unexercisable
(#)
($)
Date
Paul Travers
188,576
—
—
$
0.00875
9/03/12
1,485,232
—
—
$
0.02599
1/03/13
Grant Russell
174,256
—
—
$
0.00875
9/03/12
Options
    to Purchase Securities
The following chart sets out, as at the date of this prospectus,
    information regarding outstanding options to purchase shares of
    our common stock which have been granted to our directors,
    executive officers, employees, consultants, past directors,
    executive officers, employees and consultants.
Market Value
Securities
of Common
Number of
Under
Exercise
Shares on Date
Relationship to the Corporation
Options(1)
Option
Grant Date
Expiry Date(2)
Price(3)
of Grant
All directors and past directors of Vuzix (4 individuals in
    total)
3,365,224
common
stock
November 1, 2001
to May 1, 2009
November 1, 2011
to May 1, 2019
$0.0608
(4
)
All executive officers and past executive officers of Vuzix (3
    individuals in total — all included in the above
    grouping also)
2,222,320
common
stock
September 3, 2002
to May 1, 2009
September 3, 2002
to May 1, 2019
$0.0355
(4
)
All other employees or past employees of Vuzix (48 individuals
    in total)
8,973,642
common
stock
September 30, 2000
to May 1, 2009
September 30, 2010 to
May 1, 2019
$0.1373
(4
)
All consultants and past consultants of Vuzix
    (24 individuals in total)
6,821,587
common
stock
March 30, 2000
to May 1, 2009
June 30, 2009 to
May 1, 2019
$0.1539
(4
)
Other (none)
—
—
—
—
—
—
(1)
Represents the aggregate number of shares issuable upon exercise
    of all outstanding options and warrants held by the group.
    Except for warrants exercisable to purchase an aggregate of
    3,855,899 shares of our common stock held by our current
    and former consultants, all the securities disclosed in this
    table are options granted under our 2007 plan.
(2)
All options granted under our 2007 plan expire ten years from
    the date of grant. Warrants expire between two and five years
    from the date of issuance with a weighted average remaining term
    of 0.99 years.
(3)
Represents the weighted average exercise price of all
    outstanding options and warrants held by the members of the
    group. Individual exercise prices range: (i) for directors,
    from $0.0088 to $0.2334; (ii) for executive officers, from
    $0.0088 to $0.1500; (iii) for employees, from $0.0061 to
    $0.2334; and (iv) for consultants, from $0.0061 to $0.2333.
(4)
All options and warrants are exercisable at the fair market
    value of our common stock as of the date of grant as determined
    by our board of directors.
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Potential
    Payments upon Termination or Change in Control
We have entered into an agreement with each of Paul Travers and
    Grant Russell that would require us to provide compensation to
    them in the event of a termination of employment or a change in
    control. See "Employment Agreements" above.
Their employment agreements entitle them to severance payments
    upon their termination by us other than for "cause"
    (as defined in the agreement) or by them for "good
    reason" (as defined in the agreement) or upon their death
    or "disability" (as defined in the agreement). Under
    the agreements: (a) we shall have "cause" to
    terminate them as a result of their: (i) willfully engaging
    in conduct which is materially injurious to us;
    (ii) willful fraud or material dishonesty in connection
    with their performance as an employee; (iii) deliberate or
    intentional failure to substantially perform their duties as
    employees that results in material harm to us; or
    (iv) conviction for, or plea of
nolo contendere
to a
    charge of, commission of a felony; (b) they shall have
    "good reason" to terminate their employment upon:
    (i) a material diminution during the term of the agreements
    in their duties, responsibilities, position, office or title;
    (ii) a breach by us of the compensation and benefits
    provisions of their agreements; (iii) a material breach by
    us of any other terms of their agreements; or (iv) the
    relocation of their principal place of business at our request
    beyond 30 miles from its current location; and
    (c) they shall be deemed to be "disabled" if they
    shall be rendered incapable of performing their duties to us by
    reason of any medically determined physical or mental impairment
    that can be expected to result in death or that can reasonably
    be expected to last for a period of either (i) six or more
    consecutive months from the first date of their absence due to
    the disability or (ii) nine months during any
12-month
period. Any termination by us for cause or by them for good
    reason is subject to a
30-day
notice period and opportunity to cure.
In the event that their employment is terminated by us other
    than for cause, by them for good reason or upon their death or
    disability, Mr. Travers and Mr. Russell shall be
    entitled to be paid, in addition to any base salary and bonuses
    then accrued and unpaid, and their then current base salary for
    24 months after the date of termination and the entire
    bonus that would have been payable pursuant to any agreement,
    understanding, arrangement or plan in which he is entitled to
    participate for the year in which the termination of his
    employment occurred as if they had been employed for the entire
    year, provided that, in the opinion of the board of directors,
    they are likely to have met any bonus plan goals for the
    relevant period had they not been terminated. As a condition to
    our obligation to make any such payment, we, in our sole
    discretion, may require Mr. Travers and Mr. Russell to
    release us and our officers, directors, employees, and agents,
    from any and all claims and causes of action, including, but not
    limited to those arising from their employment and the
    termination of their employment. In the event of such
    termination, all stock options, restricted stock grants, stock
    appreciation rights and other similar awards held by them at the
    date of termination shall immediately vest, the period during
    which any options or rights relating to such grants may be
    exercised shall be the longer of the date specified in such
    grants or the date that is thirty (30) days after the end
    of the
24-month
period following the date of termination and will, in all other
    respects, continue to be governed by, and continued in
    accordance with, their applicable plan and grant documents.
Under their employment agreements, "change of control"
    means: (i) the approval by our stockholders, and the
    completion of the transaction resulting from such approval, of
    (A) the sale or other disposition of all or substantially
    all our assets or (B) our complete liquidation or
    dissolution; (ii) the sale, in a single transaction or in a
    series of related transactions, of all or substantially all of
    the outstanding shares of our capital stock; (iii) the
    approval by our stockholders, and the completion of the
    transaction resulting from such approval, of a merger,
    consolidation, reorganization or similar corporate transaction,
    whether or not we are the surviving corporation in such
    transaction, in which the outstanding shares of common stock are
    converted into (A) shares of stock of another company,
    other than a conversion into shares of voting common stock of
    the successor corporation (or a holding company thereof)
    representing fifty percent (50%) or more of the voting power of
    all capital stock thereof outstanding immediately after the
    merger or consolidation or (B) other securities (either
    ours or those of another company) or cash or other property;
    (iv) pursuant to an affirmative vote of a holder or holders
    of seventy five percent (75%) of our capital stock of the
    entitled to vote on such a matter, the removal of a majority of
    the individuals who are at that time members of the board of
    directors; or (v) the acquisition by any entity or
    individual of one hundred percent of our capital stock.
In the event of a change of control, any unvested stock options
    held by Mr. Travers or Mr. Russell shall be fully
    vested and become immediately exercisable. Such options shall
    remain exercisable for the period remaining under
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the relevant stock option agreement and shall not have a
    shortened period of exercisability as a result of the change of
    control, except for statutory stock options which shall, at
    their election, (i) expire 90 days after their
    termination (or one year after their termination upon their
    death or permanent and total disability) or (ii) be
    converted into non-qualified stock options expiring at the end
    of the entire term of such option under the relevant stock
    option agreement. Additionally, if Mr. Travers or
    Mr. Russell is terminated within one year of a change of
    control for any reason other than by us for cause, or if they
    elect to terminate their employment (whether or not for good
    reason) after the expiration of 120 days after and on or
    before the two-year anniversary of a change of control,
    Mr. Travers and Mr. Russell shall be entitled to be
    paid, in addition to any base salary and bonuses then accrued
    and unpaid, their then current base salary for 48 months
    after the date of termination and the entire bonus that would
    have been payable pursuant to any agreement, understanding,
    arrangement or plan in which they are entitled to participate
    for the year in which the termination of their employment
    occurred as if they had been employed for the entire year,
    provided that, in the opinion of the board of directors, they
    are likely to have met any bonus plan goals for the relevant
    period had he not been terminated.
Compensation
    of Directors
The following table sets forth information concerning the
    compensation for the fiscal year ended December 31, 2008 of
    our directors and directors elect who are not also named
    executive officers:
DIRECTOR
    COMPENSATION — YEAR ENDED DECEMBER 31, 2008
Fees
Nonqualified
Earned or
Non-Equity
Deferred
Paid in
Stock
Option
Incentive Plan
Compensation
All Other
Cash
Awards
Awards
Compensation
Earnings
Compensation
Total
Name
($)
($)
($)(1)
($)
($)
($)
($)
Robert F. Mechur(2)
—
—
$
1,081
—
—
—
$
1,081
William Lee(3)
—
—
—
—
—
—
—
Frank Zammataro(4)
—
—
—
—
—
—
—
Kathryn Sayko(4)
—
—
—
—
—
—
—
Bernard Perrine(4)
—
—
—
—
—
—
—
(1)
The amounts shown in this column represent the dollar amounts
    recognized for share-based compensation expense for financial
    statement reporting purposes for stock options granted in 2008
    and unvested stock options granted in prior years in accordance
    with Statement of Financial Accounting Standards No. 123
    (revised 2004),
Share-Based Payment,
but without giving
    effect to estimated forfeitures related to service-based vesting
    conditions. The assumptions used to compute the fair value are
    disclosed in note 18 (Stock-based Compensation Expense) to
    our audited financial statements for the fiscal year ended
    December 31, 2008 included in this prospectus.
(2)
Resigned from our board of directors in June 2009.
(3)
Elected to our board of directors in June 2009.
(4)
Elected, and has agreed to serve, as a member of our board of
    directors upon the effectiveness of the registration statement
    of which this prospectus forms a part.
During 2008, no cash director fees were earned by or paid to any
    non-management member of the board of directors. Under our
    2009 directors' plan, on the date each director is
    first elected or otherwise validly appointed to our board of
    directors he or she will be granted an option to purchase
    300,000 shares of our common stock at an exercise price per
    share equal to 100% of the fair market value of our common stock
    on the date of grant. These options will be 50% vested
    immediately on grant and the balance will vest ratably, on a
    monthly basis, over the next 12 months. After two years of
    service, non-management directors will thereafter receive an
    annual grant of options to purchase an additional
    150,000 shares of common stock at the fair market value as
    determined on the date of grant, which options will vest on
    December 31 in the year granted. In addition, each
    non-management director is reimbursed for ordinary expenses
    incurred in connection with attendance at such meetings. Our
    2007 option plan provided for each incoming director to be
    granted an option to purchase 250,000 shares of our common
    stock and an
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annual grant of 125,000 shares of common stock. These
    grants were otherwise on the same terms and conditions as those
    under our 2009 directors' plan.
In addition to the above option grants, in the future to recruit
    and maintain qualified directors, we believe that we will likely
    have to begin paying annual retainers, board committee
    membership and board meeting fees. It is not expected that such
    fees will be paid to any directors who are paid full salaries
    and serve as officers of the Company.
Compensation
    Committee Interlocks and Insider Participation
During 2007 and 2008, Paul J. Travers, our President and Chief
    Executive Officer, participated in deliberations of our board of
    directors concerning executive compensation.
RELATED
    PARTY TRANSACTIONS
Since January 1, 2006, we have entered into the following
    transactions in which our directors, executive officers or
    holders of more than 5% of our capital stock had or will have a
    direct or indirect material interest. The following transactions
    do not include compensation, termination and
change-in-control
arrangements, which are described under "Management."
    We believe the terms obtained or consideration that we paid or
    received, as applicable, in connection with the transactions
    described below were comparable to terms available or the
    amounts that would be paid or received, as applicable, in
    arm's-length transactions. Except as described below, we
    are not aware, after enquiring with our directors and officers,
    of any material interest, direct or indirect, of any our
    directors, executive officers, principal stockholders, or any
    associate or affiliate thereof, in any transaction within the
    last three years, or in any proposed transaction, that has
    materially affected or will materially affect our company.
Officer
    Loan
In October 2002, we entered into a stock purchase agreement with
    four of our employees, including Grant Russell, our Chief
    Financial Officer and Executive Vice President, pursuant to
    which they purchased an aggregate of 32,537,135 shares of
    common stock at an aggregate purchase price of $276,566 or
    $0.0085 per share. Of these shares, Mr. Russell purchased
    8,339,644 shares at an aggregate purchase price of $58,378.
    In order to finance the purchase of these shares, we loaned each
    employee an amount equal to the purchase price for the shares he
    purchased. Each loan was evidenced by a non-recourse promissory
    note and was secured by a pledge of the shares purchased. Each
    loan bore interest at the rate of 6% per annum, and all
    principal and interest was originally due and payable in
    September 2007. In September 2007, we extended the maturity date
    of each note until September 2012. In April 2009, we forgave the
    entire amount of Mr. Russell's indebtedness under this
    loan in payment of a one-time bonus in consideration of
    Mr. Russell's efforts in connection with this
    offering. At that time, the outstanding principal amount of the
    note payable by Mr. Russell together with all interest
    accrued thereon was $22,669. The aggregate outstanding principal
    amount of the notes payable by the employees other than
    Mr. Russell, together with all interest accrued thereon as
    of the date of this prospectus, was approximately $197,687.
Indemnification
    Agreements
We have entered into a standard form of indemnification
    agreement with each of our directors and executive officers.
    Under this agreement we are obligated to indemnify the
    indemnitee to the fullest extent permitted by applicable law for
    all reasonable expenses (including attorneys' fees and
    disbursements), judgments, fines (including excise taxes and
    penalties) and amounts paid in settlement actually and
    reasonably incurred by the indemnitee arising out of or
    connected with the indemnitee's service as a director or
    officer and indemnitee's service in another capacity at our
    request or direction. We are also obligated to advance all
    reasonable and actual expenses incurred by the indemnitee in
    connection with any action, suit, proceeding or appeal with
    respect to which he is entitled to be indemnified upon our
    receipt of an invoice for such expenses. Our obligation to
    advance expenses is subject to the indemnitee's execution,
    upon our request, of an agreement to repay all such amounts it
    if is ultimately determined that he is not entitled to be
    indemnified by us under applicable law. If a claim for
    indemnification under this agreement may not be paid to the
    indemnitee under applicable law, then in any action in which we
    are jointly liable with the indemnitee, we are obligated to
    contribute to the amount of reasonable expenses (including
    attorneys' fees and disbursements) actually and reasonably
    incurred by the indemnitee in proportion to the relative
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benefits received by us and the indemnitee from the transaction
    from which such action arose, and our relative fault and that of
    the indemnitee in connection with the events which resulted in
    such expenses. The rights of an indemnitee under the form of
    indemnification agreement are in addition to any other rights
    that the indemnitee may have under our certificate of
    incorporation or bylaws, any agreement, or any vote of our
    stockholders or directors. We are not obligated to make any
    payment under the form of indemnification agreement to the
    extent payment is actually made to the indemnitee under an
    insurance policy or any other method outside of the agreement.
Related-Person
    Transactions Policy
Pursuant to our Code of Ethics and Business Conduct, all
    employees, officers and directors of ours and our subsidiaries
    are prohibited from engaging in any relationship or financial
    interest that is an actual or potential conflict of interest
    with us without prior approval. Employees are required to
    disclose any potential or actual conflicts with supervisors or
    our ethics compliance officer if one has been appointed by the
    board and otherwise directly to the members of our board of
    directors. Officers and directors are required to disclose any
    potential or actual conflicts to our board of directors.
Our board of directors reviews and approves all transactions
    with directors, officers, and holders of five percent or more of
    our voting securities and their affiliates, or each, a related
    party. Prior to our board of directors' consideration of a
    transaction with a related party, the material facts as to the
    related party's relationship or interest in the transaction
    are disclosed to our board of directors, and the transaction is
    not considered approved by our board of directors unless a
    majority of the directors who are not interested in the
    transaction approve the transaction. Further, when stockholders
    are entitled to vote on a transaction with a related party, the
    material facts of the related party's relationship or
    interest in the transaction are disclosed to the stockholders,
    who must approve the transaction in good faith.
All future transactions between us and any of our officers and
    directors or their respective affiliates will be on terms
    believed by us to be no less favorable to us than are available
    from unaffiliated third parties. Such transactions, including
    any forgiveness of loans, will require prior approval by a
    majority of the members of our board who do not have an interest
    in the transaction who had access, at our expense, to our
    attorneys or independent legal counsel. We will not enter into
    any such transaction unless our disinterested independent
    directors or disinterested directors determine that the terms of
    such transaction are no less favorable to us than those that
    would be available to us with respect to such a transaction from
    unaffiliated third parties.
CORPORATE
    GOVERNANCE
Board of
    Directors
Our board of directors currently consists of two members: Paul
    J. Travers, our President and Chief Executive Officer, and Grant
    Russell, our Chief Financial Officer and Executive Vice
    President. William Lee, Frank Zammataro, Kathryn Sayko and
    Bernard Perrine have each been elected, and have agreed to
    serve, as a member of our board of directors subject to the
    effectiveness of the registration statement of which this
    prospectus forms a part. Our board has determined that each of
    our directors and directors elect other than Mr. Travers
    and Mr. Russell is, or will be upon the effective time of
    their election be, an independent director as defined by
    Rule 5605(a)(2) of the NASDAQ Stock Market LLC (NASDAQ). We
    believe that, upon the effectiveness of the of the registration
    statement of which this prospectus forms a part, we will be
    compliant with the independence criteria for boards of directors
    under applicable laws and regulations, including NASDAQ
    Rule 5605(a)(2). The board may meet independently of
    management as required. Although they are permitted to do so,
    the independent directors have not held regularly scheduled
    meetings at which non-independent directors and members of
    management are not in attendance.
Committees
    of the Board of Directors
Subject to the effectiveness of the registration statement of
    which this prospectus forms a part, we have established an audit
    committee, a compensation committee and a nominating committee.
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Audit
    Committee
Upon the effectiveness of the of the registration statement of
    which this prospectus forms a part, our audit committee will
    consist of William Lee, Kathryn Sayko and Bernard Perrine, each
    of whom will then be a non-employee director. Mr. Lee will
    be the chairperson of our audit committee. Our board of
    directors has determined that each member designee of our audit
    committee will be an independent director as defined by NASDAQ
    Rule 5605(a)(2) and will meet the requirements of financial
    literacy under SEC rules and regulations. Mr. Lee will
    serve as our audit committee financial expert, as defined under
    SEC rules.
Our audit committee will be responsible for, among other things:
•
selecting and hiring our independent auditors, and approving the
    audit and non-audit services to be performed by our independent
    auditors;
•
evaluating the qualifications, performance and independence of
    our independent auditors;
•
monitoring the integrity of our financial statements and our
    compliance with legal and regulatory requirements as they relate
    to financial statements or accounting matters;
•
reviewing the adequacy and effectiveness of our internal control
    policies and procedures;
•
discussing the scope and results of the audit with the
    independent auditors and reviewing with management and the
    independent auditors our interim and year-end operating
    results; and
•
preparing the audit committee report that the SEC requires in
    our annual proxy statement.
Our board of directors has adopted a written charter for our
    audit committee, which will be available on our website upon the
    completion of this offering.
Compensation
    Committee
Upon the effectiveness of the of the registration statement of
    which this prospectus forms a part, our compensation committee
    will consist of Kathryn Sayko, Bernard Perrine and Frank
    Zammataro, each of whom will then be a non-employee director.
    Ms. Sayko will be the chairperson of our compensation
    committee. Our board of directors has determined that each
    member designee of our compensation committee will be an
    independent director as defined by NASDAQ Rule 5605(a)(2).
Our compensation committee will be responsible for, among other
    things:
•
reviewing and approving compensation of our executive officers
    including annual base salary, annual incentive bonuses, specific
    goals, equity compensation, employment agreements, severance and
    change in control arrangements, and any other benefits,
    compensations or arrangements;
•
reviewing and recommending compensation goals, bonus and stock
    compensation criteria for our employees;
•
reviewing and discussing annually with management our
    "Compensation Discussion and Analysis" disclosure
    required by SEC rules;
•
preparing the compensation committee report required by the SEC
    to be included in our annual proxy statement; and
•
administering, reviewing and making recommendations with respect
    to our equity compensation plans.
Our board of directors has adopted a written charter for our
    compensation committee, which will be available on our website
    upon the completion of this offering.
Nominating
    Committee
Upon the effectiveness of the of the registration statement of
    which this prospectus forms a part, our nominating committee
    will consist of William Lee and Frank Zammataro, each of whom
    will then be a non-employee member of our board of directors.
    Mr. Zammataro will be the chairperson of our nominating
    committee.
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Our board of directors has determined that each member designee
    of our nominating committee will be an independent director as
    defined by NASDAQ 5605(a)(2).
Our nominating committee will be responsible for, among other
    things:
•
assisting our board of directors in identifying, interviewing
    and recruiting prospective director nominees;
•
recommending director nominees;
•
establishing and reviewing on an annual basis a process for
    identifying and evaluating nominees for our board of directors;
•
annually evaluating and reporting to the our board of directors
    on the performance and effectiveness of the board of directors;
•
recommending members for each board committee of our board of
    directors; and
•
annually presenting a list of individuals recommended for
    nomination for election to our board of directors at the annual
    meeting of our shareholders.
Our board of directors has adopted a written charter for our
    nominating committee, which will be available on our website
    upon the completion of this offering.
Canadian
    Governance Matters
Generally
The Canadian Securities Administrators have published National
    Policy
58-201 —
Corporate Governance Guidelines. These instruments set out a
    series of guidelines and requirements for effective corporate
    governance and in this prospectus we refer to them collectively
    as the "Guidelines." The Guidelines address matters
    such as the constitution and independence of corporate boards,
    the functions to be performed by boards and their committees and
    the effectiveness and education of board members.
Independence
Our board of directors has determined that each of our directors
    and directors elect other than Mr. Travers and
    Mr. Russell is, or will be upon the effective time of his
    or her election, independent for the purpose of National
    Instrument
58-101 —
Disclosure of Corporate Governance Practices.
Except as described below, our directors and hold no other
    directorships at the present time with other reporting issuers:
Director Name and Municipality of Residence
Other Directorships
William Lee, Vancouver, British Columbia
Tinka Resources Limited
Halo Resources Ltd.
Golden Peaks Resources Ltd.
Orientation
    and Continuing Education
Our board of directors is responsible for the orientation and
    education of new members of the board and all new directors are
    provided with copies of our policies. Prior to joining the
    board, each new director will meet with our Chief Executive
    Officer. Our Chief Executive Officer is responsible for
    outlining our business and prospects, both positive and
    negative, with a view to ensuring that the new director is
    properly informed to commence his duties as a director. Each new
    director is also given the opportunity to meet with our auditors
    and counsel. As part of its annual self-assessment process, our
    board of directors determines whether any additional education
    and training is required for board members.
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Ethical
    Business Conduct
The directors encourage and promote a culture of ethical
    business conduct through communication and supervision as part
    of their overall stewardship responsibility. In addition, our
    board of directors has adopted a code of ethics and business
    conduct for our employees, officers and directors which
    addresses our continuing commitment to conducting business with
    highest integrity and in accordance with applicable laws, rules
    and regulations. Our code of ethics and business conduct
    establishes procedures that allow our directors, officers and
    employees to confidentially submit their concerns to our ethics
    officer or to our audit committee regarding questionable
    ethical, moral, accounting or auditing matters, without fear of
    retaliation. A copy of our code of ethics and business conduct
    will be available on our website and at www.sedar.com upon the
    completion of this offering.
Nomination
    of Directors
Historically, because of our size and stage of development and
    the limited number of directors, the entire board of directors
    has taken responsibility for nominating new directors and
    assessing current directors. As of the closing of this offering,
    nominees for election to our board of directors will be
    identified, interviewed and recruited by our nominating
    committee. For additional information about our nominating
    committee, see "Corporate Governance — Committees
    of the Board of Directors — Nominating Committee"
    above.
Compensation
Historically, because of our size and stage of development and
    the limited number of directors, the compensation of our
    executive officers and directors was determined by our board of
    directors as a whole. As of the closing of this offering, our
    compensation committee will be responsible for reviewing and
    approving the compensation of our executive officers and
    directors and for reviewing and recommending compensation goals,
    bonus and stock compensation criteria for our employees. For
    additional information about our compensation committee, see
    "Corporate Governance — Committees of the Board
    of Directors — Compensation Committee" above.
Assessment
Historically, because of our size and stage of development and
    the limited number of directors, our board of directors
    considered a formal assessment process to be inappropriate and
    evaluated its own effectiveness on an ad hoc basis. As of the
    closing of this offering, our nominating committee will be
    responsible for annually evaluating and reporting to our board
    of directors on the performance and effectiveness of the board
    as a whole, its committees and individual directors. For
    additional information about our nominating committee, see
    "Corporate Governance — Committees of the Board
    of Directors — Nominating Committee" above.
SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial
    ownership of our common stock by:
•
each of our named executive officers;
•
each of our directors and directors elect;
•
each person, or group of affiliated persons, known by us to
    beneficially own more than 5% of our common stock; and
•
all of our directors, directors elect and executive officers as
    a group.
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Number of
Percentage of Shares
Shares
Beneficially Owned
Beneficially
Before
After
Name and Address of Beneficial Owner(1)
Owned(2)
Offering(3)
Offering(4)
Paul J. Travers
72,747,703
(5)
32.24
%
•
%
Grant Russell
12,288,033
(6)
5.45
%
•
%
William Lee
300,000
(8)
*
*
Frank Zammataro
175,000
(7)
*
*
Kathryn Sayko
175,000
(7)
*
*
Bernard Perrine
175,000
(7)
*
*
Paul Churnetski
20,278,453
(6)
9.06
%
•
%
Directors, directors elect and executive officers as a group
    (6 people)
85,735,736
(8)
38.44
%
•
%
*
less than 1.0%
(1)
The address for each person is
c/o Vuzix
Corporation, 75 Town Centre Drive, Rochester, NY 14623.
(2)
We have determined beneficial ownership in accordance with the
    rules of the SEC. These rules generally attribute beneficial
    ownership of securities to persons who possess sole or shared
    voting power or investment power with respect to those
    securities. In addition, the rules include shares of common
    stock issuable pursuant to the exercise of stock options or
    warrants, or the conversion of convertible promissory notes,
    that are either immediately exercisable or convertible, or that
    will become exercisable within 60 days after the date of
    this prospectus. These shares are deemed to be outstanding and
    beneficially owned by the person holding those options, warrants
    or convertible promissory notes for the purpose of computing the
    percentage ownership of that person, but they are not treated as
    outstanding for the purpose of computing the percentage
    ownership of any other person. Unless otherwise indicated, the
    persons or entities identified in this table have sole voting
    and investment power with respect to all shares shown as
    beneficially owned by them, subject to applicable community
    property laws.
(3)
The percentage of shares beneficially owned before the offering
    is based on 220,268,927 shares of our common stock issued
    and outstanding as of the date of this prospectus.
(4)
The percentage of shares beneficially owned after the offering
    is based on •  shares of our common stock
    issued and outstanding, including 9,312,899 shares of
    common stock to be issued upon the conversion of both all our
    outstanding shares of Series C Preferred Stock, together
    with all accrued and unpaid dividends, and $75,000 in aggregate
    principal amount of convertible promissory notes, together with
    all accrued and unpaid interest
    and •  shares to be issued under our fiscal
    advisory fee agreement with the Canadian agents, and assumes no
    exercise of the agents' overallotment option.
(5)
Includes 1,673,808 shares issuable upon exercise of options
    granted under our 2007 option plan.
(6)
Includes 374,256 shares issuable upon exercise of options
    granted under our 2007 option plan.
(7)
Consists of shares issuable upon exercise of options granted
    under our directors' plan, subject to the effectiveness of
    the registration statement of which this prospectus forms a
    part. Does not include an additional 125,000 shares
    issuable upon exercise of option that will vest in equal monthly
    installments and will be fully vested on the first anniversary
    of the effective date of grant.
(8)
Includes (i) 1,879,556 shares issuable upon exercise
    of options granted under our 2007 option plan and
    (ii) 700,000 shares issuable upon exercise of options
    granted under our 2009 directors' plan, subject to the
    effectiveness of the registration statement of which this
    prospectus forms a part.
DESCRIPTION
    OF CAPITAL STOCK
The following is a summary of the rights of our common stock and
    preferred stock. This summary is not complete. For more detailed
    information, please see our certificate of incorporation and
    bylaws, which are filed as exhibits to the registration
    statement of which this prospectus forms a part.
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Common
    Stock
We are authorized to issue up to 400,000,000 shares of
    common stock, par value $0.001 per share. As of the date of this
    prospectus, 220,268,927 shares of our common stock were
    issued and outstanding and held of record by 246 stockholders.
    The outstanding shares of our common stock are validly issued,
    fully paid and nonassessable.
The holders of our common stock are entitled to vote upon all
    matters submitted to a vote of our stockholders and are entitled
    to one vote for each share of common stock held. Holders of our
    common stock are not entitled to cumulative voting on any
    matter, including in the election of directors. Subject to the
    rights and preferences, if any, applicable to shares of our
    preferred stock then outstanding, the holders of our common
    stock are entitled to receive ratably such dividends, payable in
    cash, stock or otherwise, as may be declared by our board of
    directors out of any funds legally available for the payment of
    dividends and distributions to the stockholders. See
    "Dividend Policy."
In the event of our voluntary or involuntary liquidation,
    dissolution or winding up, holders of our common stock are
    entitled to share ratably in all of our assets legally available
    for distribution after payment of our liabilities and
    distribution of the liquidation preference, if any, on our
    preferred stock then outstanding. Holders of our common stock
    have no preemptive or other subscription rights and no rights of
    conversion or redemption. The rights, preferences and privileges
    of holders of our common stock are subject to the rights of
    holders of any series of our preferred stock that may then be
    issued and outstanding.
Preferred
    Stock
As of the date of this prospectus, we are authorized to issue up
    to 6,745,681 shares of preferred stock, par value $0.001
    per share. Prior to the time the registration statement of which
    this prospectus forms a part becomes effective, the number of
    shares of preferred stock that we will be authorized to issue
    will be reduced to 5,000,000. The shares of our preferred stock
    may be issued in one or more series, and shall have such voting
    powers, full or limited, or no voting powers, and such
    designations, preferences and relative participating, optional
    or other special rights, and qualifications, limitations or
    restrictions thereof, as shall be stated and expressed in the
    resolution or resolutions providing for the issuance of such
    stock adopted from time to time by our board of directors. The
    board of directors is expressly vested with the authority to
    determine and fix in the resolution or resolutions providing for
    the issuances of any series of preferred stock the voting
    powers, designations, preferences and rights, and the
    qualifications, limitations or restrictions thereof, of each
    such series to the full extent now or hereafter permitted by the
    laws of the State of Delaware.
As of the date of this prospectus, we have designated
    500,000 shares of our preferred stock as Series C
    6% Convertible Preferred Stock (Series C Preferred
    Stock). As of that date, 168,500 shares of our
    Series C Preferred Stock were issued and outstanding. We
    have agreed with the agents to use our best efforts to cause all
    of the outstanding shares of our Series C Preferred Stock,
    together with all dividends accrued and unpaid thereon, to be
    converted into common stock prior to the effective time of the
    registration statement of which this prospectus forms a part.
The outstanding shares of our preferred stock are validly
    issued, fully paid and nonassessable.
Series C
    Preferred Stock
Holders of our Series C Preferred Stock are entitled to
    vote with the holders of our common stock, together as a single
    class, on all matters submitted to the vote of holders of our
    common stock. On each such matter, each holder of our
    Series C Preferred Stock is entitled to the number of votes
    equal to the number of whole shares of our common stock into
    which such holder's Series C Preferred Stock is then
    convertible. Holders of our Series C Preferred Stock are
    entitled to receive an annual cumulative dividend of $0.60 per
    share payable in cash out of the funds legally available
    therefor and are entitled to participate ratably on an as
    converted basis in any dividends paid on our common stock. In
    the event of our voluntary or involuntary liquidation,
    dissolution or winding up, prior to any distributions to holders
    of our common stock, the holders of our Series C Preferred
    Stock are entitled to receive out of the assets legally
    available for distribution $10.00 per share (subject to
    adjustment for stock splits, stock dividends, reorganizations,
    consolidations and similar changes) plus any accrued and unpaid
    dividends.
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Each share of our Series C Preferred Stock is convertible
    at the option of the holder into that number of shares of our
    common stock equal to $10.00 divided by the conversion price
    then in effect. The initial conversion price of one preferred
    share for 30 shares of common equaled $0.3333 per share was
    subject to adjustment for stock splits, dividends payable in
    capital stock, capital reorganizations or reclassifications of
    our capital stock and is now $0.2917 per share. All of the
    shares of Series C Preferred Stock plus any unpaid accrued
    dividends then outstanding were to automatically convert into
    shares of our common stock at the same rate upon the earlier of
    the election of the holders of 67% of the Series C
    Preferred Stock outstanding or the closing of a public offering
    of our common stock pursuant to a registration statement under
    the Securities Act in which the aggregate public offering price
    of our securities sold in the offering, before deduction of
    agents commissions and discounts, is at least $10,000,000.
Our Series C Preferred Stock may be redeemed, at our
    option, at any time and from time to time and in whole or in
    part, upon written notice to the holder at a redemption price
    equal to $10.00 per share plus any accrued and unpaid dividends.
    The holders of our Series C Preferred Stock may exercise
    their conversion rights notwithstanding our delivery of a
    redemption notice until we have paid the redemption price.
We have agreed with the agents to use our best efforts to cause
    all of the outstanding shares of our Series C Preferred
    Stock, together with all dividends accrued and unpaid thereon,
    to be converted into common stock prior to the effective time of
    the registration statement of which this prospectus forms a part.
Warrants
As of the date of this prospectus, warrants to purchase a total
    of 7,172,160 shares of our common stock with a weighted
    average exercise price of $0.1815 per share were outstanding.
    Each warrant contains provisions for the adjustment of the
    exercise price and the number of shares issuable upon the
    exercise of the warrant in the event of certain stock dividends,
    stock splits, reorganizations, reclassifications and
    consolidations. In September 2006, in consideration of a
    loan to us of $500,000, we issued the lender a warrant to
    purchase our common stock. The warrant is exercisable, upon
    conversion of the promissory note issued in evidence of the
    loan, to purchase the number of shares of our common stock equal
    to the principal amount of and accrued interest on the
    promissory note then converted divided by $0.5334, at an
    exercise price per share of $0.35. The warrant expires on
    September 30, 2009. If the convertible promissory note,
    together with all accrued and unpaid interest thereon, had been
    converted on the date of this prospectus, 1,173,397 shares
    of our common stock would have been issuable upon exercise of
    the warrant at the exercise price of $0.35 per share The shares
    of common stock issuable upon exercise of this warrant are
    included in the totals above. We intend to pay the outstanding
    principal amount of this note in full, together with all accrued
    and unpaid interest from the proceeds of this offering. If we do
    so, this warrant will terminate.
Options
As of The date of this prospectus, options to purchase
    15,304,554 shares of common stock with a weighted average
    exercise price of $0.0999 per share were outstanding under our
    2007 option plan. Our board of directors has determined that no
    further options will be granted under our 2007 option plan.
As of the date of this prospectus, no options were outstanding
    under our 2009 option plan. 30,000,000 shares of our common
    stock are reserved for issuance under our 2009 option plan.
As of the date of this prospectus, options to purchase
    1,200,000 shares of common stock have been granted under
    our 2009 directors' plan, subject to the effectiveness
    of the registration statement of which this prospectus forms a
    part. 5,800,000 additional shares of our common stock are
    reserved for issuance under our 2009 directors' plan.
Convertible
    Debt
In December 2001 and January 2002, we issued and sold
    convertible promissory notes in the aggregate principal amount
    of $15,000. Interest on outstanding principal amount of the
    notes accrues at the annual rate of 7.5%. The outstanding
    principal amount of the notes, together with all accrued and
    unpaid interest thereon, is convertible at the option of the
    holder into shares of our common stock at the adjusted current
    rate of $0.057089 per share. The outstanding principal amount of
    the notes together with all unpaid accrued interest thereon was
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originally due and payable upon the consummation of our first
    equity financing after the date of issuance. We have agreed with
    the agents to use our best efforts to cause the entire
    outstanding principal amount of the notes, together with all
    unpaid accrued interest thereon, to be converted into shares of
    our common stock prior to the effective time of the registration
    statement of which this prospectus forms a part.
From April 2002 through July 2002, we issued and sold
    convertible promissory notes in the aggregate principal amount
    of $60,000. Interest on outstanding principal amount of the
    notes accrues at the annual rate of 8.0%. The outstanding
    principal amount of the notes, together with all accrued and
    unpaid interest thereon, is convertible at the option of the
    holder into shares of our common stock at the rate of the lesser
    of (i) $0.30 per share; (ii) 65% of the price at which
    shares of our common stock are offered to the public in the
    initial public offering of our common stock; or (iii) 75%
    of the weighted average price per share at which we sell our
    common stock in the first offering after issuance of the notes
    that results in aggregate gross proceeds to us of at least
    $500,000. The outstanding principal amount of the notes together
    with all unpaid accrued interest thereon was originally due and
    payable on May 31, 2004. We have agreed with the agents to
    use our best efforts to cause the entire outstanding principal
    amount of the notes, together with all unpaid accrued interest
    thereon, to be converted into shares of our common stock prior
    to the effective time of the registration statement of which
    this prospectus forms a part.
On September 19, 2006, we borrowed $500,000 from an
    individual lender and issued a convertible promissory note in
    the principal amount of $500,000 in evidence of the loan.
    Interest on the outstanding principal amount of the note accrues
    at the annual rate of 10.0%. The outstanding principal amount of
    the note, together with all accrued and unpaid interest thereon,
    is convertible at the option of the holder into shares of our
    common stock at the rate of $0.2667 per share. The outstanding
    principal amount of the note together with all unpaid accrued
    interest thereon was due and payable on January 31, 2009.
    As of January 31, 2009, the interest accrued and unpaid on
    the note was $118,493. Since January 31, 2009 interest on
    the principal amount of the note has accrued at the annual rate
    of 18.0% and we have made monthly payments of interest only. We
    intend to pay the outstanding principal amount of the note in
    full, together with all accrued and unpaid thereon, from the
    proceeds of this offering.
Registration
    Rights
In October 2000, we entered into a registration rights agreement
    with investors who purchased shares of our common stock in a
    private placement. Additional investors who purchased shares of
    our common stock in private placements closed in December 2000,
    January 2001 and September 2001 were subsequently joined as
    parties to the agreement. Under the agreement, if at any time
    after October 11, 2002 our common stock is not listed for
    trading on a recognized stock market or exchange in the United
    States or Canada or on the OTC Bulletin Board, then upon
    the request of investors holding at least a majority of the
    shares of our common stock subject to the agreement we are
    obligated to file one registration statement covering the resale
    of such shares. We are required to bear all costs, other than
    underwriting discounts and commissions, related to any such
    registration. As of the date of this prospectus,
    2,720,000 shares of our common stock are subject to the
    agreement. To date, no request for registration has been made by
    the holders of those shares.
In October 2000, we entered into a shareholders' agreement
    with certain holders of our common stock. Under the agreement,
    we are obligated to give those shareholders the opportunity to
    include their shares of common stock in any registration
    statement filed by us under the Securities Act for purposes of
    effecting a public offering of our securities (including, but
    not limited to, registration statements relating to secondary
    offerings of our securities, but excluding registration
    statements relating to our initial public offering). If any
    shareholder decides not to include all of his shares in any
    registration statement filed by us, or if the number of shares
    that he is permitted to include in such registration statement
    is limited by the underwriter, that shareholder shall continue
    to have the right to include his shares in any registration
    statement we may subsequently file. We are required to bear all
    costs, other than underwriting discounts and commissions,
    related to any such registration. As of the date of this
    prospectus, 31,764,437 shares of our common stock are
    subject to the agreement.
In June 2005, we entered into a registration rights agreement
    with investors who purchased shares of our Series C
    Preferred Stock and warrants exercisable to purchase shares of
    our common stock in a private placement. Under the agreement, we
    are obligated to give those investors the opportunity to include
    the shares of common stock issuable upon conversion of their
    Series C Preferred Stock or upon exercise of their warrants
    in any registration of our common stock under the Securities Act
    other than our initial registered offering of shares to the
    public, a
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registration in connection with a merger or other business
    combination transaction that has been consented in writing by
    the holders of the Series C Preferred Stock, or a
    registration relating to an employee benefit plan. We are
    required to bear all costs, other than underwriting discounts
    and commissions, related to any such registration. As of the
    date of this prospectus 7,060,914 shares of our common
    stock are issuable upon conversion of the Series C
    Preferred Stock, together with all accrued and unpaid dividends
    thereon. All of the warrants issued in the private placement of
    our Series C Preferred Stock were exercised in 2008.
In December 2005, pursuant to a technology acquisition agreement
    we entered into a rights agreement with New Light Industries,
    Ltd. in connection with our issuance to New Light of a warrant
    to purchase up to 1,428,571 shares of our common stock.
    Under the agreement, we are obligated to give New Light the
    opportunity to include the shares of common stock issuable upon
    exercise of its warrants in any registration of our securities
    under the Securities Act other than a registration in connection
    with a merger or other business combination transaction or
    relating to an employee benefit plan or our first firm
    commitment underwritten public offering. We are required to bear
    all costs, other than underwriting discounts and commissions,
    related to any such registration. New Light has waived its
    registration rights with respect to this offering.
Rule 144
The holders of 46.9% of our outstanding common stock have owned
    their shares for more than one year, are not affiliated with us
    and, accordingly, are able to resell their shares to the public
    with regard to any volume limitations in accordance with
    Rule 144 under the Act. In addition, 90 days after the
    date of this prospectus our stockholders who have then held
    their shares for more than six months and are not affiliated
    with us will also be able to resell their shares to the public
    without regard to any volume limitations in accordance with
    Rule 144 and our affiliates (which includes our officers
    and directors) who have held their shares for more than six
    months will be able to sell their shares to the public subject
    to certain volume and other restrictions contained in
    Rule 144. The ability of our officers and directors and
    some of our stockholder to sell under Rule 144 is subject
    the lock up agreements and
TSX-V
escrow
    arrangements described below. See "Shares Eligible For
    Future Sale."
Delaware
    Anti-Takeover Law and Provisions of our Restated Certificate of
    Incorporation and Amended and Restated Bylaws
Delaware
    Anti-Takeover Law.
As a result of this offering we may become subject to
    Section 203 of the Delaware General Corporation Law.
    Section 203 generally prohibits a Delaware corporation that
    has a class of voting stock that is listed on a "national
    securities exchange" or is held of record by more than
    2,000 stockholders from engaging in a "business
    combination" with an "interested stockholder" for
    a period of three years after the date of the transaction in
    which the person became an interested stockholder, unless it
    satisfies one of the following conditions:
•
prior to the date of the transaction, the board of directors of
    the corporation approved either the business combination or 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, excluding for purposes of determining the number of
    shares outstanding shares owned by persons who are directors and
    also officers and shares owned by employee stock plans in which
    employee participants do not have the right to determine
    confidentially whether shares held subject to the plan will be
    tendered in a tender or exchange offer; or
•
on or subsequent to the date of the transaction, the business
    combination is approved by the board and authorized at an annual
    or special meeting of stockholders, and not by written consent,
    by the affirmative vote of at least
    66
2
/
3
%
    of the outstanding voting stock which is not owned by the
    interested stockholder.
For purposes of Section 203, "business
    combination" includes:
•
any merger or consolidation involving the corporation and the
    interested stockholder;
•
any sale, transfer, pledge or other disposition involving the
    interested stockholder of 10% or more of the assets of the
    corporation;
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•
subject to exceptions, any transaction that results in the
    issuance or transfer by the corporation of any stock of the
    corporation to the interested stockholder; and
•
the receipt by the interested stockholder of the benefit of any
    loans, advances, guarantees, pledges or other financial benefits
    provided by or through the corporation.
In general, Section 203 defines an "interested
    stockholder" as any entity or person beneficially owning
    15% or more of the outstanding voting stock of the corporation
    and any entity or person affiliated with or controlling or
    controlled by such entity or person.
Neither the
TSX-V
nor
    the OTC BB constitutes a "national securities
    exchange" for purposes of Section 203. However, in the
    event that as a result of the offering our common stock is held
    of record by more than 2,000 stockholders or if the common
    stock is listed on an exchange that constitutes a national
    securities exchange within the meaning of Section 203, we
    would become subject to the foregoing restrictions.
Certificate
    of incorporation and amended and restated bylaws.
Provisions of our certificate of incorporation and bylaws may
    delay or discourage transactions involving an actual or
    potential change in our control or change in our management,
    including transactions in which stockholders might otherwise
    receive a premium for their shares and transactions that our
    stockholders might otherwise deem to be in their best interests.
    As a result, these provisions could adversely affect the price
    of our common stock. Our certificate of incorporation permits
    our board of directors to issue up to 6,785,481 shares of
    preferred stock, with any rights, preferences and privileges as
    they may designate, including the right to approve an
    acquisition or other change in our control. In addition, our
    certificate of incorporation and bylaws:
•
provide that the authorized number of directors may be changed
    only by resolution of the board of directors;
•
provide that all vacancies, including newly created
    directorships, may, except as otherwise required by law, be
    filled by the affirmative vote of a majority of directors then
    in office, even if such number is less than a quorum;
•
require that any action to be taken by our stockholders be
    effected at a duly called annual or special meeting of
    stockholders and not by written consent;
•
provide that stockholders seeking to present proposals before a
    meeting of stockholders or to nominate candidates for election
    as directors at a meeting of stockholders must provide notice in
    writing in a timely manner, and also specify requirements as to
    the form and content of a stockholder's notice;
•
do not provide for cumulative voting rights, therefore allowing
    the holders of a majority of the shares of our common stock
    entitled to vote in any election of directors to elect all of
    the directors standing for election, if they should so
    choose; and
•
provide that special meetings of our stockholders may be called
    only by the chairman of the board, our chief executive officer
    or by the board of directors pursuant to a resolution adopted by
    a majority of the total number of authorized directors.
The amendment of any of these provisions would require approval
    by the holders of at least
    66
2
/
3
%
    of our then outstanding capital stock.
Transfer
    Agent and Registrar
The main transfer agent and registrar for our common stock is
    Computershare Trust Company, N.A. in Golden, Colorado and the
    co-transfer agent and co-registrar for our common stock is
    Computershare Investor Services Inc. in Toronto, Ontario,
    Canada. The agent and registrar for our warrants is
    Computershare Trust Company of Canada in Toronto, Ontario,
    Canada.
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SHARES
    ELIGIBLE FOR FUTURE SALE
Immediately prior to this offering, there was no public market
    for our securities. Future sales of substantial amounts of
    common stock in the public market, or the perception that such
    sales may occur, could adversely affect the market price of our
    common stock. Furthermore, since only a limited number of shares
    will be available for sale shortly after this offering because
    of contractual and legal restrictions on resale described below,
    sales of substantial amounts of common stock in the public
    market after the restrictions lapse could adversely affect the
    market price for our common stock as well as our ability to
    raise equity capital in the future. There may never be an active
    public market for our common stock.
Based on the number of shares of common stock outstanding as of
    the date of this prospectus, upon completion of this
    offering, • shares of our common stock will be
    outstanding, (assuming no exercise of the agents'
    overallotment option, no exercise of other outstanding options
    or warrants and assuming conversion in full of all outstanding
    Series C Preferred Stock, together with all accrued and
    unpaid dividends thereon, at the rate of $0.2917 per share and
    conversion of $75,000 in aggregate principal amount of
    convertible promissory notes, together with all accrued and
    unpaid interest thereon, at the rate of $0.057085 per share).
    All of the shares sold in this offering (including all of the
    shares issuable upon exercise of the warrants sold in this
    offering) will be freely tradable without restriction or further
    registration under the Securities Act, except for any of those
    shares held by our "affiliates," as that term is
    defined in Rule 144 under the Securities Act, whose sales
    would be subject to the volume and manner of sale limitations of
    Rule 144 described below. In addition,
    117,436,334 shares of our common stock currently
    outstanding, or approximately • % of our common
    stock outstanding after this offering, may be resold at any
    time, subject to the
lock-up
agreements and
TSX-V
escrow
    arrangements described below. Our executive officers and
    directors currently own 82,987,673 shares, or
    approximately • % of our common stock outstanding
    after this offering, which are eligible for resale subject to
    the volume and manner of sale limitations of Rule 144 and
    subject to the
lock-up
agreements and
TSX-V
escrow
    arrangements described below. The remaining
    19,844,920 shares of our common stock currently
    outstanding, or approximately • % of our
    outstanding shares after this offering, are
    "restricted" under Rule 144 and are eligible for
    sale under the provisions of Rule 144.
We have entered into a fiscal advisory agreement with the
    Canadian agents. The agreement provides that in consideration
    for the fiscal advisory services to be provided from time to
    time by the Canadian agents to us, we will issue to the Canadian
    agents at the closing of this offering that number of shares of
    our common stock equal to, depending on the gross proceeds of
    the offering, between 1.0% and 2.0% of our common stock issued
    and outstanding immediately upon the closing of the offering.
    The shares issued to the Canadian agents under the agreement
    will be subject to resale restrictions in accordance with
    applicable Canadian securities laws and will be subject to
    resale restrictions for a period of one year following the
    closing of the offering under the
lock-up
agreements described below.
Rule 144
In general, under Rule 144 as currently in effect, a person
    (or persons whose shares are aggregated) who is not deemed to
    have been an affiliate of ours at any time during the three
    months preceding a sale, and who has beneficially owned
    restricted securities within the meaning of Rule 144 for at
    least six months (including any period of consecutive ownership
    of preceding non-affiliated holders) would be entitled to sell
    those shares, subject only to the availability of current public
    information about us. A non-affiliated person who has
    beneficially owned restricted securities within the meaning of
    Rule 144 for at least one year would be entitled to sell
    those shares without regard to the provisions 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 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 260,846 shares immediately
    after this offering; or
•
The average weekly trading volume of the common stock on the
TSX-V
during
    the four calendar weeks preceding the filing of a notice on
    Form 144 with respect to such sale.
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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 under the Securities Act, as currently in effect,
    permits the resale of shares in reliance on Rule 144
    without compliance with certain restrictions of Rule 144,
    including the holding period requirement. Most of our employees,
    executive officers, directors and consultants who purchased
    shares under a written compensatory plan or contract may be
    entitled to rely on the resale provisions of Rule 701
    provided that they wait until 90 days after the date of
    this prospectus before selling their shares. However,
    substantially all Rule 701 shares are subject to
lock-up
agreements as described below and under "Underwriting"
    and will become eligible for sale upon the expiration of those
    agreements (or as otherwise permitted under those agreements).
Lock-Up
Agreements
We have agreed with the agents to use our commercially
    reasonable efforts to cause our directors, executive officers
    and stockholders who will hold more than 2.5% of our outstanding
    common stock (or securities exercisable, exchangeable or
    convertible for common stock) on a fully-diluted basis
    immediately after the closing of this offering, who currently
    collectively represent approximately 61.9% of our outstanding
    shares of common stock, to enter into agreements with the agents
    not to offer, sell, assign, transfer, pledge, contract to sell
    or otherwise dispose of or hedge any shares of our common stock,
    or any securities convertible into or exchangeable for shares of
    common stock, for a period of one year following the closing of
    this offering. Additionally, we have agreed with the agents to
    use our commercially reasonable efforts to cause stockholders
    who will hold more than 1.0% of our outstanding common stock (or
    securities exercisable, exchangeable or convertible for common
    stock) on a fully-diluted basis immediately after the closing of
    this offering and our key employees, who collectively represent
    approximately 11.0% of our outstanding shares of common stock,
    to enter into agreements with the agents not to offer, sell,
    assign, transfer, pledge, contract to sell or otherwise dispose
    of or hedge any shares of our common stock, or any securities
    convertible into or exchangeable for shares of common stock, for
    a period of six months following the closing of this offering.
    The shares of our common stock to be issued to the Canadian
    agents under our fiscal advisory fee agreement will also be
    subject to restrictions on resale for a period of one year after
    the closing of the offering under the terms of the lock-up
    agreement. The agents may, in their sole discretion, at any time
    without prior notice, release all or any portion of the shares
    from the restrictions in any such agreement. We have been
    advised by the agents that, in considering any request to
    release shares subject to a
lock-up
agreement, they will consider, among other factors, the
    stockholder's reasons for requesting the release, the
    number of shares for which the release is being requested and
    market conditions at the time. Notwithstanding the foregoing,
    for the purposes of allowing the agents to comply with NASD
    Rule 2711(f)(4), if, under certain circumstances during the
16-day
period beginning on the last day of the
lock-up
period, we release earnings results or publicly announce other
    material news or a material event relating to us is publicly
    announced, the
lock-up
period will be extended until 18 days following the date of
    release of the earnings results or the announcement of the
    material news or material event, as applicable.
Registration
    Rights
Upon completion of this offering, the holders of
    31,764,437 shares of our common stock, and warrants to
    purchase up to 1,428,571 shares of our common stock will be
    entitled to include their shares of common stock in any
    subsequent registration statement that we file registering the
    sale of common stock under the Securities Act, subject to
    certain limitations and exceptions. Registration of these shares
    under the Securities Act would result in the shares becoming
    freely tradable without restriction under the Securities Act,
    except for shares purchased by affiliates, immediately upon the
    effectiveness of the registration. Any sales of securities by
    these stockholders could have a material adverse effect on the
    trading price of our common stock. See "Description of
    Capital Stock — Registration Rights."
Equity
    Incentive Plans
We intend to file with the SEC a registration statement under
    the Securities Act covering the shares of common stock reserved
    for issuance under our 2007 option plan, 2009 option plan and
    directors' plan. We expect the
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registration statements to be filed and become effective as soon
    as practicable after the completion of this offering. Shares
    registered under that registration statement will be available
    for sale in the open market following its effective date,
    subject to Rule 144 volume limitations and the
lock-up
arrangements described above and the
TSX-V
escrow
    arrangements described below, if applicable.
The following three sections describe restrictions on resale
    arising under the rules and regulations of applicable Canadian
    securities regulators and the
TSX-V.
Principal's
    Escrow
In accordance with the National Policy
46-201
Escrow for Initial Public Offerings
(National Policy
46-201),
our
    Principals (as defined below) are required to deposit into
    escrow our equity securities and any securities that are
    convertible into our equity securities that they own or control
    (which we refer to as the "Principal's Escrow").
    "Principals" include all persons or companies that
    will, on the completion of this offering, fall into at least one
    of the following categories: (i) a person or company who
    acted as our promoter within two years before the date of this
    prospectus; (ii) our directors
and/or
senior officers; (iii) those who own
and/or
control more than 10% of our voting securities immediately after
    the completion of this offering if they also have appointed or
    have the right to appoint one or more of our directors or senior
    officers; (iv) those who own
and/or
control more than 20% of our voting securities immediately after
    the completion of this offering; (v) associates and
    affiliates of any of the above; (vi) a company, trust,
    partnership or other entity more than 50% held by one or more
    Principals; and (vii) a Principal's spouse and their
    relatives that live at the same address as the Principal.
Pursuant to the Principals' Escrow, the Principals will
    deposit into escrow with Computershare Investor Services Inc.
    their shares of common stock, warrants and options to purchase
    shares of our common stock (which we refer to as the
    "Escrowed Securities") which will be subject to escrow.
Upon completion of this offering, we expect that we will be
    classified by applicable Canadian securities regulators as an
    "established issuer." Accordingly, 25% of the Escrowed
    Securities will be released from escrow upon receipt of notice
    from the
TSX-V
confirming the listing of our common stock on the
TSX-V.
The
    remaining 75% of the Escrowed Securities will be released from
    escrow in 25% tranches at six-month intervals over an
18-month
period following receipt of such notice.
TSX-V
Seed Share Resale Restrictions
Securities that were issued to people other than our Principals
    prior to the completion of this offering will be subject to hold
    periods imposed by the
TSX-V
(which
    we refer to as the
"TSX-V
Escrow"). The purchase price of such securities and the
    time of their purchase relative to the date of a receipt for
    this prospectus by the applicable Canadian securities regulators
    will determine which
TSX-V
hold
    period applies. The
TSX-V
hold
    period does not apply to persons who are subject to the
    Principal's Escrow as discussed above.
Summary
    of Escrow and Contractual Restrictions on Transfer
As of the date hereof, the following table sets out the number
    and percentage of our securities which will be subject to the
    Principal's Escrow upon the closing of this offering.
Number of
Percentage of Class Outstanding
Securities Held in
Prior to the
Designation of Class
Escrow(1)
Offering
After the Offering
Common Stock
106,475,137
(1)
48.3
%
Options
6,513,920
3.0
%
Warrants
—
—
—
(1)
Pursuant to National Policy
46-201, • shares
of our common stock will be held in escrow under the
    Principals' Escrow. Pursuant to the
TSX-V
Escrow, • shares of our common stock will be held
    in escrow under the Seed Escrow.
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UNDERWRITING
We intend to enter into an agency agreement with Canaccord
    Capital Corporation and Bolder Investment Partners, Ltd. to
    serve as co-lead agents of our offering in Canada. Neither
    Canaccord nor Bolder will directly offer any of our units in the
    United States. Offers of our units in the United States will be
    made only through Canaccord Adams Inc., a US registered broker
    dealer affiliated with Canaccord Capital Corporation, and such
    other US registered dealers as may be designated by our Canadian
    agents. This offering is made on a commercially reasonable
    "best efforts" basis. This means that the agents have
    not committed to buy any of our units, but shall use
    commercially reasonable efforts to sell our units for us.
As consideration for their services, the Canadian agents will
    receive: (i) a commission equal to 8% of the gross proceeds
    of the offering; (ii) options entitling the Canadian agents
    to purchase that number of shares our common stock and warrants
    equal to 12.5% of the aggregate number of shares of our common
    stock and warrants sold under the offering (including the shares
    and warrants issued upon exercise of the over-allotment option),
    at the offering price per share and warrant, respectively, for a
    period of 12 months from the closing date; and (iii) a
    non-refundable due diligence fee of Cdn$15,000. The Canadian
    agents will also be reimbursed for their reasonable fees and
    expenses including the reasonable legal fees and disbursements
    of legal counsel to the agents. The Canadian agents may appoint
    selling agents in the United States, including Canaccord Adams
    Inc., which may be paid selling commissions not to exceed 6% of
    the gross proceeds of the offering in the United States and
    options entitling US selling agents to purchase that number of
    shares of our common stock and warrants equal to 8% of the
    aggregate number of shares of our common stock and warrants sold
    in the United States under the offering (including the shares
    and warrants issued upon exercise of the over-allotment option)
    at the initial public offering price for a period of
    12 months from the closing date. The commission paid to US
    selling agents will be paid by the Canadian agents from their
    commissions.
The agents will use commercially reasonable efforts to sell up
    to • units at a minimum price of
    Cdn$ •  per unit. The offering is not subject to
    any minimum number of units sold or our receipt of any minimum
    proceeds from the sale of the units. We may elect to hold more
    than one closing until we have sold all of units offered or
    until our offering terminates. We have granted the agents an
    over-allotment option, exercisable for a period of 30 days
    from the date of the closing of this offering, to sell
    additional shares of common stock and whole warrants up to the
    lesser of the agents' over-allocation position determined
    as of the time of closing of the offering
    and • shares of common stock
    and • whole warrants (15% of the number of shares
    and warrants offered by us under this prospectus) or any
    combination thereof at a price of Cdn$ •  per
    share and Cdn$ •  per warrant to cover
    over-allotments, if any, and for market stabilization purposes.
    For greater clarity, these warrants will only be issued for the
    purpose of distribution of units to purchasers. The aggregate
    number of shares and warrants issuable to purchasers pursuant to
    the offering will not
    exceed • and • , respectively.
The warrants will be issued pursuant to the terms of a warrant
    indenture dated as of the closing date between us and
    Computershare Trust Company of Canada, as warrant agent.
    The warrant indenture will contain provisions designed to
    protect the holders of warrants against dilution upon the
    happening of certain events. No fractional shares will be issued
    upon exercise of the warrants.
The obligations of the agents under the agency agreement may be
    terminated by the agents in their discretion on the basis of
    their assessment of the state of the financial markets and may
    also be terminated in certain stated circumstances and upon the
    occurrence of certain stated events.
The agents, or registered
sub-agents
who assist the agents in the distribution of the units offered
    hereunder, conditionally offer the units, subject to prior sale,
    if, as and when issued by us and accepted by the agents in
    accordance with the conditions contained in the agency agreement
    and subject to the approval of certain legal matters, on behalf
    of counsel to both us and the agents. While the agents will
    solicit expressions of interest and arrange for subscriptions
    for units prior to closing, the agents will not accept proceeds
    prior to closing. Subscriptions for the common stock and
    warrants constituting the units will be received subject to
    rejection or allotment in whole or in part and the right is
    reserved to close the subscription books at any time without
    notice.
We estimate that our total expenses of the offering, excluding
    underwriting commissions, will be approximately
    $      million and are payable by
    us. We will pay all these expenses from the proceeds of the
    offering. We will also reimburse the agents for all of their
    expenses including all of the fees owed by them to their legal
    counsel.
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Offering
    Price Determination
Prior to the offering, there has been no public market for our
    securities. The initial public offering price of our units will
    be negotiated between us and the agents. In addition to
    prevailing market conditions, the factors considered in
    determining the initial public offering price are our financial
    information, our historical performance, our future prospects
    and the future prospects of our industry in general, our capital
    structure, estimates of our business potential and earnings
    prospects, the present state of our development and an
    assessment of our management and the consideration of the above
    factors in relation to market valuation of companies engaged in
    businesses and activities similar to ours.
An active trading market for our common stock may not develop.
    It is also possible that after the offering, the shares of
    common stock will not trade in the public market at or above the
    initial public offering price. Any of the underwriting
    activities mentioned in this section may have the effect of
    preventing or retarding a decline in the market price of the
    common stock. The agents may also cause the price of the common
    stock to be higher than the price that would otherwise exist in
    the open market in the absence of these transactions. The agents
    may conduct these transactions on the
TSX-V
or in
    the
over-the-counter
market, or otherwise. If the agents commence any of these
    transactions, they may discontinue them at any time.
The agents do not intend to confirm sales of the shares to any
    accounts over which they have discretionary authority.
Allocation
    of Purchase Price
In acquiring our units, the purchasers will be acquiring
    ownership of the shares of common stock and the warrants
    represented by our units. The shares of common stock and
    warrants represented by our units are separate securities and,
    accordingly, purchasers will be required to allocate the
    purchase price paid for units between the shares of common stock
    and the warrants on a reasonable basis in order to determine
    their respective costs for purposes of federal income tax. We
    intend to allocate Cdn$ •  of the public offering
    price of each unit as consideration for the issue of each share
    of common stock and Cdn$ •  for the issue of each
    one-half warrant. Although we believe this allocation is
    reasonable, this allocation will not be binding on the Internal
    Revenue Service or any other tax authority and neither Vuzix nor
    our counsel express any opinion as to this allocation.
The
    information provided herein does not constitute tax advice. You
    must consult your own tax advisors concerning the application of
    US federal income tax laws to your particular situation as well
    as any consequences of the purchase, ownership, and disposition
    of the shares of common stock and warrants arising under the
    laws of any other jurisdiction.
Stabilization,
    Short Positions and Penalty Bids
Until the distribution of the shares is completed, SEC rules may
    limit agents and selling group members from bidding for and
    purchasing our common stock. However, the agents'
    representatives may engage in transactions that stabilize the
    price of our common stock, such as bids or purchases to peg, fix
    or maintain that price.
If the agents create a short position in the common stock in
    connection with the offering (i.e., if they sell more shares
    than are listed on the cover of this prospectus), the
    agents' representatives may reduce that short position by
    purchasing shares in the open market. The agents'
    representatives may also elect to reduce any short position by
    exercising all or part of the over-allotment option described
    above. Purchases of the common stock to stabilize its price or
    to reduce a short position may cause the price of the common
    stock to be higher than it might be in the absence of such
    purchases.
The agents' representatives may also impose a penalty bid
    on agents and selling group members. This means that if the
    agents' representatives purchase shares of common stock in
    the open market to reduce the underwriter's short position
    or to stabilize the price of such shares of common stock, they
    may reclaim the amount of the selling concession from the agents
    and selling group members who sold those shares of common stock.
    The imposition of a penalty bid may also affect the price of the
    shares of common stock in that it discourages resales of those
    shares of common stock.
88
Table of Contents
Neither we nor any of the agents make any representation or
    prediction as to the direction or magnitude of any effect that
    the transactions described above may have on the price of the
    common stock. In addition, neither we nor any of the agents make
    any representation that the agents' representatives or lead
    manager will engage in these transactions or that these
    transactions, once commenced, will not be discontinued without
    notice.
Lock-Up
Agreements
We have agreed with the agents to use our commercially
    reasonable efforts to cause our directors, executive officers
    and stockholders who will hold more than 2.5% of our outstanding
    common stock (or securities exercisable, exchangeable or
    convertible for common stock) on a fully-diluted basis
    immediately after the closing of this offering, who collectively
    hold approximately • % of our outstanding shares
    of common stock, to enter into agreements with the agents not to
    offer, sell, assign, transfer, pledge, contract to sell or
    otherwise dispose of or hedge any shares of our common stock, or
    any securities convertible into or exchangeable for shares of
    common stock, for a period of one year following the closing of
    this offering. Additionally, we have agreed with the agents to
    use our commercially reasonable efforts to cause stockholders
    who will hold more than 1.0% of our outstanding common stock (or
    securities exercisable, exchangeable or convertible for common
    stock) on a fully-diluted basis immediately after the closing of
    this offering and our key employees, who collectively hold
    approximately • % of our outstanding shares of
    common stock, to enter into agreements with the agents not to
    offer, sell, assign, transfer, pledge, contract to sell or
    otherwise dispose of or hedge any shares of our common stock, or
    any securities convertible into or exchangeable for shares of
    common stock, for a period of six months following the closing
    of this offering.
The foregoing restricted periods will be extended if during the
    last 17 days of the restricted period we issue an earnings
    release or material news or a material event relating to us
    occurs, or prior to the expiration of the restricted period we
    announce that we will release earnings results during the
16-day
period beginning on the last day of the restricted period, in
    which case the restrictions described above will continue to
    apply until the expiration of the
18-day
period beginning on the issuance of the earnings release or the
    occurrence of the material news or material event.
The restriction described in the immediately preceding
    paragraphs do not apply to: (a) transactions by
    stockholders not deemed to be our affiliates relating to shares
    of common stock or other securities acquired in open market
    transactions after the completion of this offering;
    (b) transfers of shares of common stock or any security
    exercisable for shares of common stock as a
bona fide
gift or gifts; (c) distributions of shares of common
    stock or any security exercisable for shares of common stock to
    corporations, partnerships, limited liability companies or other
    entities to the extent that such entities are wholly-owned by
    the stockholder that agrees to be bound by the restrictions
    described in the preceding paragraphs; (d) tenders of
    shares of common stock made in response to a
bona fide
third party take-over bid made to all holders of shares of
    common stock or similar acquisition transaction; (e) any
    transfer to an immediate family member or an entity of which the
    transferor or an immediate family member of the transferor is
    the sole beneficiary; or (f) a pledge of shares of common
    stock or any security exercisable for shares of common stock to
    a bank or other financial institution for the purpose of giving
    collateral for a debt made in good faith; provided, that in the
    case of any transfer, distribution or pledge pursuant to clause
    (b), (c), (e) or (f), each donee, distributee, transferee
    or pledgee agrees in writing to be bound by the transfer
    restrictions described in the preceding paragraphs and no filing
    by any party under the Exchange Act shall be required or shall
    be voluntarily made in connection with subsequent sales of
    shares of common stock or other securities acquired in such
    transfer or distribution.
Indemnification
We have agreed to indemnify the agents against certain
    liabilities relating to the offering, including without
    restriction liabilities under the Securities Act, and
    liabilities arising from breaches of the representations and
    warranties contained in the underwriting agreement, and to
    contribute to payments that the agents may be required to make
    for these liabilities.
Fiscal
    Advisory Fee Agreement
We have entered into a fiscal advisory fee agreement with the
    Canadian agents. The agreement provides that the Canadian agents
    have and will continue to provide certain customary fiscal
    advisory services, including assisting and
89
Table of Contents
advising us with respect to capital markets strategies and
    assisting us in its development of an investor relations
    strategy and communications with existing investors. In
    consideration for the services to be provided under the
    agreement, we will issue to the Canadian agents at the closing
    of this offering that number of shares of our common stock equal
    to, depending on the gross proceeds of the offering, between
    1.0% and 2.0% of our common stock issued and outstanding
    immediately upon the closing of the offering. The shares issued
    to the Canadian agents under the agreement will be issued
    pursuant to exemptions from the registration requirements of
    applicable United States and Canadian securities laws and
    will be subject to resale restrictions under those laws and to
    resale restrictions for a period of one year following the
    closing of the offering under the
lock-up
agreements described above. The agreement will terminate, and we
    will have no obligation to issue any shares to the Canadian
    agents thereunder, if the offering has not closed by
    October 31, 2009.
LEGAL
    MATTERS
Boylan, Brown, Code, Vigdor & Wilson, LLP, Rochester,
    New York, will pass upon the validity of the shares of common
    stock being offered by this prospectus. The agents are being
    represented by in this offering by Dorsey & Whitney
    LLP, Denver, Colorado.
EXPERTS
Rotenberg & Co. LLP, an independent registered public
    accounting firm, has audited our consolidated financial
    statements as of December 31, 2008. Davie Kaplan,
    CPA, P.C., an independent registered public accounting
    firm, has audited our financial statements as of
    December 31, 2007 and 2006 as set forth in their reports
    thereon accompanying such financial statements included in this
    prospectus and in this registration statement. We have included
    these financial statements in this prospectus and in the
    registration statement in reliance on both Rotenberg &
    Co. LLP and Davie Kaplan's reports, given on the authority
    of such firm as experts in accounting and auditing.
As of the date hereof, the partners, counsel and associates of
    Boylan, Brown, Code, Vigdor & Wilson, LLP or
    Dorsey & Whitney LLP beneficially own directly or
    indirectly, respectively, less than 1% of our common stock or
    any common stock of any of our affiliates or associates.
WHERE YOU
    CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on
Form S-1
(including exhibits and schedules thereto) under the Securities
    Act with respect to the shares of common stock being offered by
    this prospectus. This prospectus does not contain all of the
    information included in the registration statement. For further
    information about us and our common stock offered by this
    prospectus, we refer you to the registration statement.
    Statements contained in this prospectus as to the contents of
    any contract or any other document referred to are not
    necessarily complete, and in each instance, we refer you to the
    copy of the contract or other document filed as an exhibit to
    the registration statement. Each of these statements is
    qualified in all respects by this reference.
You may read our SEC filings, including the registration
    statement, over the Internet at the SEC's website at
    www.sec.gov. You may also read and copy any document we file
    with the SEC at its public reference facilities at
    100 F Street, N.E., Room 1580,
    Washington, D.C. 20549. In addition, you may obtain copies
    of these documents at prescribed rates by writing to the Public
    Reference Section of the SEC at 100 F Street, N.E.,
    Room 1580, Washington, D.C. 20549. Please call the SEC
    at
1-800-SEC-0330
for further information on the operation of the public reference
    facilities.
Upon completion of this offering, we will be subject to the
    information reporting requirements of the Securities Exchange
    Act and we will file reports, proxy statements and other
    information with the SEC. These reports, proxy statements and
    other information will be available for inspection and copying
    at the public reference facilities and website of the SEC
    referred to above. We also maintain a website at www.vuzix.com,
    at which you may access these materials free of charge as soon
    as reasonably practicable after they are electronically filed
    with, or furnished to, the SEC. The information contained on,
    connected to or that can be accessed through our website is not
    part of this prospectus. We have included our website address in
    this prospectus as an inactive textual reference only and not as
    an active hyperlink.
90
Table of Contents
VUZIX
    CORPORATION
INDEX
    TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Rotenberg & Co. LLP,
    Independent Registered Public Accounting Firm
F-2
Report of Davie Kaplan, CPA, P.C., Independent
    Registered Public Accounting Firm
F-3
Consolidated Balance Sheets —
    December 31, 2007 and 2008 and March 31, 2008 and 2009
    (Unaudited)
F-4
Consolidated Statements of Stockholders'
    (Deficit) Equity — For The Years Ended
    December 31, 2006, 2007 and 2008 and the Three Months Ended
    March 31, 2009 (Unaudited)
F-5
Consolidated Statements of Cash Flows —
    For the Years Ended December 31, 2006, 2007 and 2008 and
    the Three Months Ended March 31, 2008 and 2009
    (Unaudited)
F-6
Consolidated Statements of Operations —
    For the Years Ended December 31, 2006, 2007 and 2008 and
    the Three Months Ended March 31, 2008 and 2009
    (Unaudited)
F-7
Notes to Consolidated Financial Statements
F-8
F-1
Table of Contents
REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Stockholders of Vuzix Corporation
We have audited the accompanying consolidated balance sheet of
    Vuzix Corporation and its subsidiary as of December 31,
    2008, and the related consolidated statement of operations,
    changes in stockholders' equity and cash flows for the
    period then ended. Vuzix Corporation's management is
    responsible for these financial statements. Our responsibility
    is to express an opinion on these financial statements based on
    our audit. The financial statements of Vuzix Corporation as of
    December 31, 2007, were audited by other auditors whose
    report dated June 17, 2008 expressed an unqualified opinion
    on those statements.
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 included
    consideration of internal control over financial reporting as a
    basis for designing audit procedures that are appropriate in the
    circumstances, but not for the purpose of expressing an opinion
    on the effectiveness of the company's internal control over
    financial reporting. Accordingly, we express no such opinion. An
    audit also includes examining, on a test basis, evidence
    supporting the amounts and disclosures in the financial
    statements, assessing the accounting principles used and
    significant estimates made by management, as well as evaluating
    the overall financial statement presentation. We believe that
    our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
    to above present fairly, in all material respects, the financial
    position of Vuzix Corporation as of December 31, 2008, and
    the results of its operations and its cash flows for the period
    ending December 31, 2008 in conformity with accounting
    principles generally accepted in the United States of America.
/s/ Rotenberg & Co. LLP
Rochester, New York
June 17, 2009
F-2
Table of Contents
INDEPENDENT
    AUDITORS' REPORT
To the Board of Directors and Stockholders
VUZIX Corporation
We have audited the balance sheets of VUZIX Corporation (F/K/A
    Icuiti Corporation) as of December 31, 2007 (Restated) and
    2006, and the related statements of operations, changes in
    stockholders' equity and cash flows for the years then
    ended. These financial statements are the responsibility of the
    Company's management. Our responsibility is to express an
    opinion on these financial statements based on our audits.
We conducted our audits in accordance with U.S. generally
    accepted auditing standards. Those standards require that we
    plan and perform the audit to obtain reasonable assurance about
    whether the financial statements are free of material
    misstatement. An audit includes examining, on a test basis,
    evidence supporting the amounts and disclosures in the financial
    statements. An audit also includes assessing the accounting
    principles used and significant estimates made by management, as
    well as evaluating the overall financial statement presentation.
    We believe that our audits provide a reasonable basis for our
    opinion.
In our opinion, the financial statements referred to above
    present fairly, in all material respects, the financial position
    of VUZIX Corporation (F/K/A Icuiti Corporation) as of
    December 31, 2007 (Restated) and 2006, and the results of
    its operations, changes in stockholders' equity and its
    cash flows for the years then ended in conformity with
    U.S. generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on
    the basic financial statements taken as a whole. The
    supplemental information is presented for the purpose of
    additional analysis and is not a required part of the basic
    financial statements. Such information has been subjected to the
    auditing procedures applied in the audit of the basic financial
    statements and, in our opinion, is fairly stated in all material
    respects in relation to the basic financial statements taken as
    a whole.
As discussed in Note 20 to the financial statements, the
    2007 financial statements have been restated to correct a
    misstatement.
/s/  Davie
    Kaplan, CPA, P.C.
June 17, 2008
(Except for Note 20, as to which the date is April 14,
    2009)
F-3
Table of Contents
VUZIX
    CORPORATION
F/K/A ICUITI CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31,
March 31,
December 31,
December 31,
December 31,
2009
2008
2008
2007
2006
(Unaudited)
(Unaudited)
(As restated)
ASSETS
Current Assets
Cash and Cash Equivalents
$
259,151
$
69,534
$
818,719
$
364,856
$
569,171
Accounts Receivable, Net (Note 3)
962,519
872,126
1,413,611
2,908,224
1,977,103
Inventories (Note 4)
2,426,298
2,618,470
2,307,321
1,984,465
1,157,733
Prepaid Income Taxes
130,130
136,130
130,130
130,130
—
Prepaid Expenses and Other Assets
67,449
109,680
41,390
108,525
2,500
Total Current Assets
3,845,547
3,803,940
4,711,171
5,496,200
3,706,507
Tooling and Equipment, Net (Note 5)
721,860
869,534
825,924
857,170
781,979
Patents and Trademarks, Net (Note 6)
710,176
642,751
684,802
613,884
524,777
Total Assets
$
5,277,583
$
5,316,225
$
6,221,897
$
6,967,254
$
5,013,263
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable
$
4,348,752
$
3,249,518
$
4,763,321
$
4,029,630
$
2,743,349
Lines of Credit (Note 7)
199,767
186,270
202,290
78,400
92,237
Current Portion of Long-term Debt
500,000
—
500,000
—
200,000
Current Portion of Capital Leases
139,800
139,800
139,800
171,778
155,625
Customer Deposits (Note 8)
328,841
742,154
729,677
46,637
125,584
Accrued Expenses (Note 9)
220,246
103,879
185,960
171,872
319,946
Income Taxes Payable
888
34,039
36,412
31,225
—
Total Current Liabilities
5,738,294
4,455,660
6,557,460
4,529,542
3,636,741
Long-Term Liabilities
Accrued Compensation (Note 10)
445,096
445,096
445,096
445,096
445,096
Long Term Portion of Long-Term Debt (Note 11)
379,208
784,208
379,208
784,208
991,188
Long Term Portion of Capital Leases (Note 12)
145,410
232,115
180,328
247,052
216,519
Accrued Interest
443,120
341,560
425,448
314,921
211,574
Cumulative Dividends Payable on Preferred Stock
349,574
248,474
324,299
223,199
122,099
Total Long-Term Liabilities
1,762,408
2,051,453
1,754,379
2,014,476
1,980,476
Total Liabilities
7,500,702
6,507,113
8,311,839
6,544,018
5,617,217
Stockholders' Equity
Series C Preferred Stock — $.001 Par Value,
    500,000 Shares Authorized; (Refer to Note 14 for
    Series A, Series B and Unauthorised Preferred Stock)
    168,500 Shares Issued and Outstanding in Each Period
    (Note 14)
169
169
169
169
169
Common Stock — $.001 Par Value,
    400,000,000 Shares Authorized; 220,268,927,
    200,424,027 Shares Issued and Outstanding
    March 31, Respectively 218,268,927, 197,973,139 and
    173,268,048 Shares Issued and Outstanding
    December 31, Respectively
220,269
200,424
218,269
197,972
173,268
Additional Paid-in Capital
13,039,100
10,299,419
12,700,413
10,238,589
6,115,622
Accumulated (Deficit)
(15,161,140
)
(11,369,383
)
(14,687,276
)
(9,691,977
)
(6,531,363
)
Subscriptions Receivable (Note 19)
(321,517
)
(321,517
)
(321,517
)
(321,517
)
(361,650
)
Total Stockholders' Equity
(2,223,119
)
(1,190,888
)
(2,089,942
)
423,236
(603,954
)
Total Liabilities and Stockholders' Equity
$
5,277,583
$
5,316,225
$
6,221,897
$
6,967,254
$
5,013,263
The accompanying notes are an integral part of these
    consolidated financial statements.
F-4
Table of Contents
VUZIX
    CORPORATION
F/K/A ICUITI CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN
    STOCKHOLDERS' EQUITY
Common Stock
Additional
Retained
Preferred Stock
Subscriptions
Shares
Amount
Paid-In Capital
Deficit
Shares
Amount
Receivable
Total
Balance — December 31, 2005
173,245,191
$
173,245
$
5,593,693
$
(5,718,223
)
123,000
$
123
$
(266,240
)
$
(217,402
)
Issuance of Preferred Stock
—
—
407,604
—
45,500
46
—
407,650
Dividends
—
—
—
(93,186
)
—
—
—
(93,186
)
Stock Compensation Expense
—
—
18,418
—
—
—
—
18,418
Exercise of Stock Options
22,857
23
497
—
—
—
—
520
Extension of Subscriptions Receivable
—
—
95,410
—
—
—
(95,410
)
—
2006 Net Loss
—
—
—
(719,954
)
—
—
—
(719,954
)
Balance — December 31, 2006
173,268,048
173,268
6,115,622
(6,531,363
)
168,500
169
(361,650
)
(603,954
)
Warrants Issued for Services
—
—
78,275
—
—
—
—
78,275
Exercise of Stock Options
402,483
402
5,328
—
—
—
—
5,730
Exercise of Stock Warrants
177,136
177
1,373
—
—
—
—
1,550
Issuance of Common Stock
23,125,472
23,125
3,767,686
—
—
—
—
3,790,811
Conversion of Debt into Stock
1,000,000
1,000
199,000
—
—
—
—
200,000
Stock Compensation Expense
—
—
111,438
—
—
—
—
111,438
Dividends
—
—
—
(101,100
)
—
—
—
(101,100
)
Extension of Subscriptions Receivable
—
—
(40,133
)
—
—
—
40,133
—
2007 Net Loss
—
—
—
(3,059,514
)
—
—
—
(3,059,514
)
Balance — December 31, 2007
    (As Restated)
197,973,139
197,972
10,238,589
(9,691,977
)
168,500
169
(321,517
)
423,236
Exercise of Options
2,450,888
2,451
14,245
—
—
—
—
16,696
Issuance of Common Stock
15,847,517
15,848
2,122,798
—
—
—
—
2,138,646
Exercise of Stock Warrants
1,552,936
1,553
12,033
—
—
—
—
13,586
Stock Issued for Services
444,447
444
66,223
—
—
—
—
66,667
Dividends
—
—
—
(101,100
)
—
—
—
(101,100
)
Warrants Issued for Services
—
—
66,227
—
—
—
—
66,227
Stock Compensation Expense
—
—
180,298
—
—
—
—
180,298
2008 Net Loss
—
—
—
(4,894,199
)
—
—
—
(4,894,199
)
Balance — December 31, 2008
218,268,927
$
218,268
$
12,700,413
$
(14,687,276
)
168,500
$
169
$
(321,517
)
$
(2,089,943
)
Exercise of Options
—
—
—
—
—
—
—
—
Issuance of Common Stock
2,000,000
2,000
298,000
—
—
—
—
300,000
Exercise of Stock Warrants
—
—
—
—
—
—
—
—
Stock Issued for Services
—
—
—
—
—
—
—
—
Repurchase of Fractional Shares
—
—
(2
)
—
—
—
(2
)
Dividends
—
—
—
(25,275
)
—
—
—
(25,275
)
Warrants Issued for Services
—
—
—
—
—
—
—
—
Stock Compensation Expense
—
—
40,689
—
—
—
—
40,689
Net Loss for the 3 months ended March 31, 2009
—
—
—
(448,589
)
—
—
—
(448,589
)
Balance — March 31, 2009 (Unaudited)
220,268,927
$
220,268
$
13,039,100
$
(15,161,140
)
168,500
$
169
$
(321,517
)
$
(2,223,120
)
The accompanying notes are an integral part of these
    consolidated financial statements.
F-5
Table of Contents
VUZIX
    CORPORATION
F/K/A ICUITI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Three Months Ended
For Years Ended
March 31,
December 31,
2009
2008
2008
2007
2006
(Unaudited)
(Unaudited)
(As restated)
Cash Flows from Operating Activities
Net Loss
$
(448,589
)
$
(1,652,195
)
$
(4,894,199
)
$
(3,059,514
)
$
(719,954
)
Non-Cash Adjustments
Depreciation and Amortization
138,834
123,696
510,133
374,078
276,989
Stock-Based Compensation Expense
40,689
46,584
180,298
111,438
18,418
Stock Issued for Services
—
—
66,667
—
—
Warrants Issued for Services
—
—
66,227
78,275
—
(Increase) Decrease in Operating Assets
Accounts Receivable
451,092
2,032,098
1,494,613
(931,121
)
(1,226,116
)
Inventories
(118,977
)
(634,005
)
(322,856
)
(826,732
)
(362,118
)
Prepaid Income Taxes
—
—
(130,130
)
—
Prepaid Expenses and Other Assets
(26,060
)
(1,155
)
67,135
(106,025
)
4,919
Increase (Decrease) in Operating Liabilities
Accounts Payable
(414,504
)
(780,111
)
733,691
1,580,255
1,496,609
Accrued Expenses
34,284
(67,929
)
14,088
(175,574
)
289,124
Customer Deposits
(400,836
)
695,517
683,040
(78,947
)
(117,722
)
Income Taxes Payable
(35,524
)
2,814
5,187
31,225
3,192
Accrued Commissions
—
—
—
(266,475
)
266,475
Accrued Compensation
—
—
—
135,000
Accrued Interest
17,672
26,639
110,527
103,347
55,237
Net Cash Flows (Used in) Provided From Operating
    Activities
(761,919
)
(208,047
)
(1,285,449
)
(3,295,900
)
120,053
Cash Flows from Investing Activities
Purchases of Tooling and Equipment
(19,369
)
(122,380
)
(424,166
)
(180,310
)
(370,188
)
Investments in Patents and Trademarks
(40,839
)
(42,547
)
(125,638
)
(136,433
)
(109,048
)
Net Cash Used in Investing Activities
(60,208
)
(164,927
)
(549,804
)
(316,743
)
(479,236
)
Cash Flows from Financing Activities
Net Change in Lines of Credit
(2,523
)
107,870
123,890
(13,837
)
(115,138
)
Issuance of Common Stock
300,000
—
2,138,646
3,792,362
—
Issuance of Preferred Stock
—
—
—
—
407,650
Repayment of Capital Leases
(34,918
)
(46,915
)
(98,702
)
(168,947
)
(121,135
)
Prepayment of Long-Term Debt
—
—
—
(206,980
)
(22,328
)
Exercise of Stock Options
—
16,697
16,696
5,730
520
Exercise of Stock Warrants
—
—
13,586
—
—
Proceeds from Long-Term Debt
—
—
95,000
—
725,000
Net Cash Flows Provided by Financing Activities
262,559
77,652
2,289,116
3,408,328
874,569
Net Increase (Decrease) in Cash and Cash Equivalents
(559,568
)
(295,322
)
453,863
(204,315
)
515,386
Cash and Cash Equivalents — Beginning of Year
818,719
364,856
364,856
569,171
53,785
Cash and Cash Equivalents — End of Year
$
259,151
$
69,534
$
818,719
$
364,856
$
569,171
Supplemental Disclosures
Interest Paid
45,747
29,490
149,214
138,345
179,019
Income Taxes Paid
36,412
425
425
3,725
1,950
Non-Cash Investing Transactions
Equipment Acquired Under Capital Lease
—
9,528
89,833
221,633
317,932
Equipment Acquired Through Assumption of Long-Term Debt
—
—
—
—
62,010
Dividends Declared but Not Paid
25,275
25,275
101,100
101,100
93,186
Debt Converted to Equity
—
—
—
200,000
The accompanying notes are an integral part of these
    consolidated financial statements.
F-6
Table of Contents
VUZIX
    CORPORATION
F/K/A ICUITI CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For Three Months
For Years Ended
Ended March 31,
December 31,
2009
2008
2008
2007
2006
(Unaudited)
(Unaudited)
(As restated)
Sales of Products
$
2,595,504
$
1,663,875
$
11,015,784
$
4,701,004
$
6,910,866
Sales of Engineering Services
448,490
57,039
1,548,703
5,445,375
2,627,442
Total Sales
3,043,994
1,720,914
12,564,487
10,146,379
9,538,308
Cost of Sales — Products
1,617,174
1,440,348
7,844,519
3,407,340
4,269,908
Cost of Sales — Engineering Services
239,509
47,001
1,018,989
3,376,133
1,497,642
Total Cost of Sales
1,856,683
1,487,349
8,863,508
6,783,473
5,767,550
Gross Profit
1,187,311
233,565
3,700,979
3,362,906
3,770,758
Operating Expenses:
Research and Development
502,011
736,716
3,366,518
2,365,412
1,279,239
Selling and Marketing
449,266
449,562
2,128,625
1,920,164
1,191,800
General and Administrative
478,253
533,799
2,299,685
1,718,627
1,560,278
Depreciation and Amortization
138,834
123,696
510,133
374,078
276,989
Total Operating Expenses
1,568,364
1,843,773
8,304,961
6,378,281
4,308,306
Loss from Operations
(381,053
)
(1,610,208
)
(4,603,982
)
(3,015,375
)
(537,548
)
Other Income (Expense)
Interest and Other (Expense) Income
188
2,549
313
Foreign Exchange Gain (Loss)
(1,272
)
366
(24,216
)
Legal Settlement
—
—
—
96,632
—
Interest Expenses
(65,376
)
(41,600
)
(260,977
)
(241,692
)
(179,019
)
Total Other Income (Expense)
(66,648
)
(41,234
)
(285,005
)
(142,511
)
(178,706
)
Loss Before Provision for Income Taxes
(447,701
)
(1,651,442
)
(4,888,987
)
(3,157,886
)
(716,254
)
Provision (Benefit) for Income Taxes (Note 13)
888
753
5,212
(98,372
)
3,700
Net Loss
(448,589
)
$
(1,652,195
)
$
(4,894,199
)
$
(3,059,514
)
$
(719,954
)
Basic and Diluted Loss per Share
$
(0.0022
)
$
(0.0084
)
$
(0.0229
)
$
(0.0160
)
$
(0.0047
)
Weighted-average Shares Outstanding — Basic and Diluted
220,268,927
200,424,027
218,268,927
197,973,139
173,268,048
The accompanying notes are an integral part of these
    consolidated financial statements.
F-7
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
(Amounts
    and disclosures at and for the three months ended March 31,
    2009 and 2008 are unaudited)
Note 1 —
    Basis of Presentation
The unaudited Consolidated Financial Statements of Vuzix
    Corporation and Subsidiary (the "Company") for the
    three months ending March 31, 2009 and 2008 have been
    prepared in accordance with generally accepted accounting
    principles in the United States of America for interim financial
    information. Accordingly, the Consolidated Financial Statements
    do not include all of the information and footnotes required by
    generally accepted accounting principles for complete financial
    statements. In the opinion of management, all adjustments
    considered necessary for a fair presentation have been included.
    The results for the interim periods are not necessarily
    indicative of the results to be expected for the year. The
    accompanying Consolidated Financial Statements should be read in
    conjunction with the audited Consolidated Financial Statements
    of the Company as of December 31, 2008, as included with
    these consolidated financial statements.
Note 2 —
    Nature of Business and Summary of Significant Accounting
    Policies
The
    Company
Vuzix Corporation (the Company) was formed in 1997 under the
    laws of the State of Delaware and maintains its corporate
    offices in Rochester, New York. The Company changed its name to
    Vuzix Corporation in September 2007, being previously known as
    Icuiti Corporation. The Company is engaged in the design,
    manufacture, marketing and sale of devices that are worn like
    eyeglasses and which feature built-in video screens that enable
    the user to view video and digital content, such as movies,
    computer data, the Internet or video games. Our products (known
    commercially as "Video Eyewear") are used to view high
    resolution video and digital information from portable devices,
    such as cell phones, portable media players, gaming systems and
    laptop computers and from personal computers. Our products
    provide the user with a virtual viewing experience that emulates
    viewing a large screen television or desktop computer monitor
    practically anywhere, anytime.
Segment
    Data, Geographic Information and Significant
    Customers
The Company is not organized by market and is managed and
    operated as one business. A single management team that reports
    to the chief operating decision maker comprehensively manages
    the entire business. The Company does not operate any material
    separate lines of business or separate business entities.
    Accordingly, the Company does not accumulate discrete
    information, other than product revenue and material costs, with
    respect to separate product lines and does not have separately
    reportable segments as defined by Statement of Financial
    Accounting Standards (SFAS) No. 131, "Disclosures
    about Segments of an Enterprise and Related Information."
Shipments to customers outside of the United States approximated
    20%, 12% and 5% of sales in 2008, 2007 and 2006, respectively.
    No single international country represented more than 10% of
    revenues. The Company does not maintain significant amounts of
    long-lived assets outside of the United States other than
    tooling held by its third party manufacturers, primarily in
    China.
The Company has at times had a concentration of sales to the
    U.S. government and they amounted to approximately 12% and
    54% of sales in 2008 and 2007, respectively. Accounts receivable
    from the U.S. government accounted for 31% and 19% of
    accounts receivable at 2008 and 2007, respectively. Another
    customer, who is also a minority stockholder, represented 20%
    and 17% of sales in 2008 and 2007, respectively.
Principles
    of Consolidation
The consolidated financial statements include the accounts of
    the Company and its wholly owned subsidiary, Vuzix Europe. All
    significant inter-company transactions have been eliminated.
F-8
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Foreign
    Currency Translation
The U.S. dollar is the functional currency of the
    Company's foreign subsidiary. Monetary assets and
    liabilities are re-measured at year-end exchange rates.
    Non-monetary assets and liabilities are re-measured at
    historical rates. Revenues, expenses, gains and losses are
    re-measured using the rates on which those elements were
    recognized during the period.
Use of
    Estimates
The preparation of the consolidated financial statements in
    conformity with accounting principles generally accepted in the
    United States requires management to make estimates and
    assumptions that affect the reported amounts of assets and
    liabilities and disclosure of contingent assets and liabilities
    at year end and the reported amounts of revenue and expenses
    during the reporting period. Actual results could differ from
    those estimates.
Concentration
    of Credit Risk
The Company performs ongoing credit evaluations of its
    customers' financial condition and maintains an allowance
    for uncollectible accounts receivable based upon the expected
    collectability of all accounts receivable. As of
    December 31, 2008, one customer, represented 31% of net
    accounts receivable and was subsequently received during 2009.
For cash management purposes, the Company concentrates its cash
    holdings in two accounts at the JP Morgan Chase Bank. The
    balance in these accounts may exceed the federally insured limit
    of $250,000 per customer by the Federal Deposit Insurance
    Corporation in case of bank failure. At December 31, 2008
    and 2007, the Company had $462,808 and $250,851 in excess of the
    insurance limit at this bank.
Cash
    and Cash Equivalents
The Company's cash received is applied against its two
    revolving lines of credit on a periodic basis based projected
    monthly cash flows, reducing interest expense. Cash and cash
    equivalents can include highly liquid investments with original
    maturities of three months or less.
Fair
    Value of Financial Instruments
The Company's financial instruments primarily consists of
    cash and cash equivalents, accounts receivable, inventories,
    prepaid income taxes, prepaid expenses and other assets,
    accounts payable, lines of credit, current portion of long-term
    debt and capital leases, customer deposits, accrued expenses,
    and income taxes payable.
As of the consolidated balance sheet date, the estimated fair
    values of the financial instruments were not materially
    different from their carrying values as presented due to the
    short maturities of these instruments and that the interest
    rates on the borrowing approximate those that would have been
    available for loans for similar remaining maturity and risk
    profiles at respective year ends.
Allowance
    for Doubtful Accounts
The Company establishes an allowance for uncollectable trade
    accounts receivable based on the age of outstanding invoices and
    management's evaluation of collectability of outstanding
    balances. These provisions are established when the aging of
    outstanding amounts exceeds allowable terms and are re-evaluated
    at each quarter end for adequacy. In determining the adequacy of
    the provision, the Company considers known uncollectable or at
    risk receivables.
F-9
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Provision
    for Future Warranty Costs
Warranty costs are accrued, to the extent that they are not
    recoverable from third party manufacturers, for the estimated
    cost to repair or replace products for the balance of the
    warranty periods. The Company's products are covered by
    standard warranty plans that extend normally 12 months to
    24 months from the date of product shipment. The Company
    provides for the costs of expected future warranty claims at the
    time of product shipment or over-builds to cover replacements.
    The adequacy of the provision is assessed at each quarter end
    and is based on historical experience of warranty claims and
    costs. As of December 31, 2008, the Company's
    provision for future warranty claims was $106,865 compared to
    $73,064 as of December 31, 2007, with the increase
    attributable primarily to increased revenue from product
    shipments.
Inventories
Inventories are valued at the lower of cost, or market using the
first-in,
first-out method. The Company does not include any direct
    overheads costs in its inventory valuation costing, as such
    amounts have been immaterial in its current and prior fiscal
    years. The Company records provisions for excess, obsolete or
    slow moving inventory based on changes in customer demand,
    technology developments or other economic factors. The
    Company's products have product life cycles that range on
    average from two to three years currently. At both the product
    introduction and product discontinuation stage, there is a
    higher degree of risk of inventory obsolescence. The provision
    for obsolete and excess inventory is evaluated for adequacy at
    each quarter end. The estimate of the provision for obsolete and
    excess inventory is partially based on expected future product
    sales, which are difficult to forecast for certain products.
Revenue
    Recognition
The Company recognizes revenue from product sales in accordance
    with the SEC Staff Accounting Bulletin No. 104,
    "Revenue Recognition.
"
Product sales represent
    the majority of the Company's revenue. The Company
    recognizes revenue from these product sales when persuasive
    evidence of an arrangement exists, delivery has occurred or
    services have been provided, the sale price is fixed or
    determinable, and collectability is reasonably assured.
    Additionally, the Company sells its products on terms which
    transfer title and risk of loss at a specified location,
    typically shipping point. Accordingly, revenue recognition from
    product sales occurs when all factors are met, including
    transfer of title and risk of loss, which typically occurs upon
    shipment by the Company. If these conditions are not met, the
    Company will defer revenue recognition until such time as these
    conditions have been satisfied. The Company collects and remits
    sales taxes in certain jurisdictions and reports revenue net of
    any associated sales taxes. The Company also sells certain
    products through distributors who are granted limited rights of
    return for stock balancing against purchases made within a prior
    90 day period, including price adjustments downwards that
    the Company implements on any existing inventory. The provision
    for product returns and price adjustments is assessed for
    adequacy both at the time of sale and at each quarter end and is
    based on recent historical experience and known customer claims.
Revenue from any engineering consulting and other services is
    recognized at the time the services are rendered. The Company
    accounts for its longer-term development contracts, which to
    date have all been firm fixed-priced contracts, on the
percentage-of-completion
method, whereby income is recognized as work on contracts
    progresses, but estimated losses on contracts in progress are
    charged to operations immediately. The
percentage-of-completion
is determined using the
cost-to-cost
method. Amounts are generally billed on a monthly basis. To date
    all such contracts have been less than one calendar year in
    duration.
F-10
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Tooling
    and Equipment
Tooling and equipment are stated at cost. Depreciation of
    tooling and equipment is provided for using the straight-line
    method over the following estimated useful lives:
Computers and Software
3 years
Manufacturing Equipment
5 years
Tooling
3 years
Furniture and Equipment
5 years
Repairs and maintenance costs are expensed as incurred. Asset
    betterments are capitalized.
Patents
    and Trademarks
The Company capitalizes the costs of obtaining its patents and
    registration of Trademarks. Such costs are accumulated and
    capitalized during the filing periods, which can take several
    years to complete. Successful applications that result in the
    granting of a patent or trademark are then amortized over
    15 years on a straight-line basis. Unsuccessful
    applications are written off and expensed in the fiscal period
    where application is abandoned or discontinued.
Long-Lived
    Assets
The Company regularly assesses all of its long-lived assets for
    impairment when events or circumstances indicate their carrying
    amounts may not be recoverable, in accordance with
    SFAS No. 144, "Accounting for the Impairment or
    Disposal of Long-Lived Assets."
Research
    and Development
Research and development costs, are expensed as incurred and
    include employee related costs, office expenses, third party
    design and engineering services, and new product prototyping
    costs.
Shipping
    and Handling Costs
Amounts charged to customers and costs incurred by the Company
    related to shipping and handling are included in net sales and
    cost of goods sold, respectively, in accordance with EITF Issue
No. 00-10,
"Accounting for Shipping and Handling Fees and Costs."
Advertising
Advertising costs are expensed as incurred and recorded in
    "Selling and marketing" in the Consolidated Statements
    of Operations. Advertising expense amounted to $1,009,992,
    $893,973 and $291,800 for 2008, 2007 and 2006, respectively.
Income
    Taxes
The Company accounts for income taxes in accordance with
    SFAS No. 109. Accordingly, the Company provides
    deferred income tax assets and liabilities based on the
    estimated future tax effects of differences between the
    financial and tax bases of assets and liabilities based on
    currently enacted tax laws. A valuation allowance is established
    for deferred tax assets in amounts for which realization is not
    considered more likely than not to occur.
The Company reports any interest and penalties accrued relating
    to uncertain income tax positions as a component of the income
    tax provision.
F-11
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Earnings
    Per Share
Basic earnings per share is computed by dividing net income by
    the weighted average number of common shares outstanding for the
    period. Diluted earnings per share calculations reflect the
    assumed exercise and conversion of all dilutive employee stock
    options and the conversion of any outstanding convertible
    preferred shares or notes payable that
are-in-the-money,
applying the treasury stock method. However, the assumed
    exercise of stock options and warrants and the conversion of
    preferred shares or notes payable are anti-dilutive, therefore
    basic and diluted earnings per share are the same for all
    periods. All share and per-share amounts in the accompanying
    consolidated financial statements and notes to the consolidated
    financial statements have been adjusted to apply the effect of
    the reverse stock split
(one-for-seven)
in 2007 and the forward stock split
(eight-for-one)
in 2008.
Stock-Based
    Employee Compensation
Effective January 1, 2006, the provisions of
    SFAS No. 123 (revised 2004), "Share-Based
    Payment," and related interpretations were adopted.
    SFAS No. 123(R) requires that compensation expense be
    recognized in the consolidated financial statements for
    share-based awards based on the grant-date fair value of those
    awards. The Company elected to not adopt
    SFAS No. 123(R) for any stock options granted prior to
    December 31, 2005 which had unrecognized compensation
    expense at January 1, 2006, and has instead applied it to
    only new share-based awards granted subsequent to
    December 31, 2005, based on the grant-date fair value
    estimated in accordance with the provisions of
    SFAS No. 123(R). Stock-based compensation expense
    includes an estimate for pre-vesting forfeitures and is
    recognized over the requisite service periods of the awards on a
    straight-line or graded vesting basis, which is generally
    commensurate with the vesting term. As a result of the adoption
    of SFAS No. 123(R), stock-based compensation expense
    associated with stock option grants of $180,298, $111,438 and
    $18,418 was recorded in 2008, 2007 and 2006, respectively.
The Company issues new shares upon stock option exercises.
    Please refer to Note J,
Stock-based Compensation
    Expense
, for further information.
Fair
    Value Measurements
In September 2006, the Financial Accounting Standards Board
    ("FASB") issued SFAS No. 157, "Fair
    Value Measurements" ("SFAS No. 157").
    SFAS No. 157 defines fair value, establishes a
    framework for measuring fair value in accordance with accounting
    principles generally accepted in the United States, and expands
    disclosures about fair value measurements. The Company has
    adopted the provisions of SFAS No. 157 as of
    January 1, 2008 for financial instruments. This standard
    defines fair value, establishes a framework for measuring fair
    value in generally accepted accounting principles, and expands
    disclosures about fair value measurements. Further, the Company
    has taken into consideration the guidance promulgated in FASB
    Staff Position
No. FAS 157-3,
"Determining the Fair Value of a Financial Asset When the
    Market for that Asset is Not Active," in estimating the
    fair value of its financial instruments. The adoption of
    SFAS 157 was not material to the Company's
    consolidated financial statements or results of operations.
SFAS No. 157 establishes a fair value hierarchy which
    prioritizes the inputs to valuation techniques used to measure
    fair value. Level 1 inputs are quoted prices in active
    markets for identical assets or liabilities. Level 2 inputs
    are inputs other than quoted prices included in Level 1
    that are directly or indirectly observable for the asset or
    liability. Such inputs include quoted prices in active markets
    for similar assets and liabilities, quoted prices for identical
    or similar assets or liabilities in markets that are not active,
    inputs other than quoted prices that are observable for the
    asset or liability, or inputs derived principally from or
    corroborated by observable market data by correlation or other
    means. Level 3 inputs are unobservable inputs for the asset
    or liability. Such inputs are used to measure fair value when
    observable inputs are not available.
F-12
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Recent
    Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141(R),
    "Business Combinations," a revision to
    SFAS No. 141, "Business Combinations."
    SFAS No. 141(R) provides revised guidance for
    recognition and measurement of identifiable assets and goodwill
    acquired, liabilities assumed and any non-controlling interest
    in the acquiree at fair value. The Statement also establishes
    disclosure requirements to enable the evaluation of the nature
    and financial effects of a business combination.
    SFAS No. 141(R) is required to be applied
    prospectively to business combinations for which the acquisition
    date is on or after January 1, 2009. The impact of the
    adoption of SFAS 141(R) on our consolidated financial
    position and results of operations will be dependent on the size
    and nature of business combinations, if any, completed after the
    adoption of this Statement.
In December 2007, the FASB issued SFAS No. 160,
    "Non-controlling Interests in Consolidated Financial
    Statements — an amendment of ARB No. 51."
    This Statement establishes accounting and reporting standards
    for ownership interests in subsidiaries held by parties other
    than the parent. Specifically, SFAS No. 160 requires
    the presentation of non-controlling interests as equity in the
    Consolidated Balance Sheets, and separate identification and
    presentation in the Consolidated Statements of Income of net
    income attributable to the entity and the non-controlling
    interest. It also establishes accounting and reporting standards
    regarding deconsolidation and changes in a parent's
    ownership interest. SFAS No. 160 is effective as of
    January 1, 2009. The provisions of SFAS No. 160
    are generally required to be applied prospectively, except for
    the presentation and disclosure requirements, which must be
    applied retrospectively. We do not expect the adoption of SFAS
    No. 160 to have a material effect on our consolidated
    financial statements.
In February 2008, the FASB issued FSP
FAS 157-2,
which delays the effective date of SFAS No. 157 for all
    non-financial assets and non-financial liabilities, except those
    that are recognized or disclosed at fair value in the
    consolidated financial statements on a recurring basis (at least
    annually). This FSP partially deferred the effective date of
    SFAS No. 157 to fiscal years beginning after
    November 15, 2008, and interim periods within those fiscal
    years for items within the scope of this FSP. This FSP will be
    adopted by the Company in the first quarter of fiscal year 2009,
    and is not expected to have a material impact on its
    consolidated financial statements.
In March 2008, the FASB issued SFAS No. 161,
    "Disclosures about Derivative Instruments and Hedging
    Activities, an amendment of FASB Statement No. 133."
    This statement enhances the disclosure requirements related to
    derivative instruments and hedging activity to improve the
    transparency of financial reporting, and is effective for fiscal
    years and interim periods beginning after November 15,
    2008. We do not expect the impact of adoption of SFAS
    No. 161 will have a material effect on our consolidated
    financial statements.
Note 3 —
    Accounts Receivable, Net
Accounts receivable consisted of the following:
December 31,
2008
2007
Accounts Receivable
$
1,417,870
$
2,908,224
Less: Allowance for Doubtful Accounts
(4,259
)
—
Net
$
1,413,611
$
2,908,224
F-13
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Note 4 —
    Inventories, Net
Inventories consisted of the following:
December 31,
2008
2007
Purchased Parts and Components
$
2,091,734
$
1,656,093
Work in Process
130,351
197,413
Finished Goods
539,883
211,994
Less: Reserve for Obsolescence
(454,647
)
(81,035
)
Net
$
2,307,321
$
1,984,465
Note 5 —
    Tooling and Equipment, Net
Tooling and equipment consisted of the following:
December 31,
2008
2007
Tooling and Manufacturing Equipment
$
1,567,537
$
1,247,402
Computers and Software
522,274
463,847
Furniture and Equipment
360,695
315,091
$
2,450,506
$
2,026,340
Less: Accumulated Depreciation and Amortization
(1,624,582
)
(1,169,170
)
Net
$
825,924
$
857,170
Total depreciation expense for tooling and equipment for 2008,
    2007 and 2006 was $455,412, $326,752, and $237,592, respectively.
Note 6 —
    Patents and Trademarks, Net
December 31,
2008
2007
Patents and Trademarks
$
899,952
$
774,314
Less: Amortization
(215,150
)
(160,430
)
Net
$
684,802
$
613,884
Total amortization expense for patents and trademarks for 2008,
    2007 and 2006 was $54,720, $47,326, and $39,397, respectively.
    The estimated aggregate amortization expense for each of the
    next five fiscal years is $57,175.
Note 7 —
    Lines of Credit
The Company has available a $100,000 line of credit secured by
    the personal guarantee of an officer of the Company with
    interest payable at the bank's prime rate plus 4.24%. The
    outstanding balance on the line of credit amounted to $96,040
    and $78,400 at December 31, 2008 and 2007, respectively.
    The prime rate at 2008 was 3.25%.
The Company also has available a $112,500 line of credit with
    interest payable at the bank's prime rate plus 1%. The line
    is unsecured and personally guaranteed by an officer of the
    Company. The outstanding balance on the line of credit amounted
    to $106,250 and $0 at December 31, 2008 and 2007,
    respectively.
F-14
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Note 8 —
    Customer Deposits
Customer deposits represents money the Company received in
    advance of providing a product or engineering services to a
    customer. Such deposits are short term in nature as the Company
    delivers the product or engineering services to the customer
    before the end of its next annual fiscal period.
Note 9 —
    Accrued Expenses
Accrued expenses consisted of the following:
December 31,
2008
2007
Accrued Wages and Related Costs
$
25,478
$
65,194
Accrued Professional Services
40,000
27,500
Accrued Warranty Obligations
106,865
73,064
Other Accrued Expenses
13,617
6,114
Total
$
185,960
$
171,872
The Company has warranty obligations in connection with the sale
    of certain of its products. The warranty period for its products
    is generally one year except in European countries where it is
    two years. The costs incurred to provide for these warranty
    obligations are estimated and recorded as an accrued liability
    at the time of sale. The Company estimates its future warranty
    costs based on product-based historical performance rates and
    related costs to repair. The changes in the Company's
    accrued warranty obligations for 2008, 2007 and 2006 were as
    follows:
Accrued Warranty Obligations at January 1, 2006
$
15,361
Actual Warranty Experience
(28,317
)
Warranty Provisions
55,431
Accrued Warranty Obligations at December 31, 2006
$
42,475
Actual Warranty Experience
(48,710
)
Warranty Provisions
79,299
Accrued Warranty Obligations at December 31, 2007
$
73,064
Actual Warranty Experience
(71,244
)
Warranty Provisions
105,045
Accrued Warranty Obligations at December 31, 2008
$
106,865
Note 10 —
    Accrued Compensation
Accrued compensation represents amounts owed to officers of the
    Company for services rendered prior to 2007 that remain
    outstanding. The principal is not subject to a fixed repayment
    schedule, and interest on the outstanding balance is payable at
    8% per annum. Interest expense related to accrued compensation
    amounts to $35,608, $35,608 and $24,808 for the years ended
    December 31, 2008, 2007 and 2006, respectively. Total
    accrued interest on the accrued compensation was $154,753 and
    $119,145 as of December 31, 2008 and 2007, respectively and
    these amounts are included in Accrued Interest, under the
    Long-Term Liabilities portion of the consolidated balance sheet.
F-15
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Note 11 —
    Long-Term Debt
Long-term debt consisted of the following at December 31:
December 31,
2008
2007
Note payable to an officer of the Company. The principal is not
    subject to a fixed repayment schedule, bears interest at 8% per
    annum and is secured by all of the assets of the Company
$
209,208
$
209,208
During October 2008, entered into an agreement with an officer
    of the Company, whereby the officer agrees to make loans from
    time to time to the Company through December 31, 2010,
    accruing interest on the outstanding balance at 12%, secured by
    all of the assets of the Company
95,000
—
Bridge loans in the original amount of $15,000 to stockholders
    of the Company with no fixed date of repayment, accruing
    interest at 7.5% and are unsecured. The Company has granted
    holders the same conversion terms as the $60,000 in notes below
15,000
15,000
Convertible promissory notes in the original amount of $60,000.
    These notes bear interest at 8% and are unsecured. There is no
    set date of repayment
60,000
60,000
Convertible Notes payable bearing interest at 10% and is secured
    by all the assets of the Company
500,000
500,000
$
879,208
$
784,208
Less: Amount Due Within One Year
500,000
—
Amount Due After One Year
$
379,208
$
784,208
The aggregate maturities for all long-term borrowings as of
    December 31, 2008 are as follows:
2009
2010
2011
2012
2013
Thereafter
Total
$
500,000
$
95,000
$
—
$
—
$
—
$
284,208
$
879,208
Include above are convertible promissory notes and bridge loans
    that the Company has issued. The notes and loans may be
    converted into the Company's common stock at $0.0571 per
    share. Unpaid, accrued interest on these notes and loans amounts
    to $48,717 and $40,085 at December 31, 2008 and 2007,
    respectively. The total potential conversions of these notes and
    loans along with accrued interest amounted to 2,144,522 and
    2,013,078 shares at December 31, 2008 and 2007,
    respectively.
Included above is a $500,000 convertible note payable due to a
    related party. The note may be converted into the Company's
    common stock at $0.2667 per share. Unpaid accrued interest on
    this note amounted to $114,247 and $64,110 at December 31,
    2008 and 2007, respectively. The total potential note conversion
    along with accrued interest amounted to 2,303,138 and
    2,115,148 shares at December 31, 2008 and 2007,
    respectively. This note was due January 31, 2009 and was
    still outstanding as of March 31, 2009. The interest rate
    has changed to 18% onwards and the note principal is now being
    rolled-over on a month to month basis.
F-16
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Note 12 —
    Capital Lease Obligations
The Company maintains equipment held under capital lease
    obligations due in monthly installments ranging from $95 to
    $2,811 including interest at rates ranging from 0.00% to 20.08%.
    The related equipment is collateral to the leases. Final
    payments are due through September, 2011.
December 31,
2008
2007
Total Principal Payments
$
320,128
$
418,830
Less: Amount Due Within One Year
(139,800
)
(171,778
)
Amount Due After One Year
$
180,328
$
247,052
Annual requirements for retirement of the capital lease
    obligations are as follows:
December 31,
Amount
2009
$
244,610
2010
109,498
2011
30,301
2012
—
2013
—
Total Minimum Lease Payments
$
384,409
Less: Amount Representing Interest
(64,281
)
Present Value of Minimum Lease Payments
$
320,128
The following is a summary of assets held under capital leases:
December 31,
2008
2007
Tooling and Manufacturing Equipment
$
390,940
$
313,657
Computers and Software
315,591
303,042
Furniture and Equipment
112,648
112,648
$
819,179
729,347
Less: Accumulated Depreciation
(490,866
)
(286,127
)
Net
$
328,313
$
443,220
Depreciation expense related to the assets under capital lease
    amounted to $204,739, $175,114, and $98,043 for years ended
    December 31, 2008, 2007, and 2006, respectively.
Note 13 —
    Income Taxes
The Company files U.S. federal, and U.S. state tax
    returns. At December 31, 2008, the Company had unrecognized
    tax benefits totaling $2,962,000, of which would have a
    favorable impact on our tax provision (benefit), if recognized.
Pre-tax earnings consisted of the following for the years ended
    December 31, 2008, 2007 and 2006:
December 31,
2008
2007
2006
Total Pre-Tax (Loss) Earnings
$
(4,888,987
)
$
(3,157,886
)
$
(716,254
)
F-17
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
The provision (benefit) for income taxes was as follows:
December 31,
2008
2007
2006
Current Income Tax Provision (Benefit)
Federal
$
—
$
—
$
—
State
5,212
(98,372
)
3,700
Net Change in Liability for Unrecognized Tax Benefits
—
—
—
$
5,212
$
(98,372
)
$
3,700
Deferred Provision (Benefit)
—
—
—
Total Provision (Benefit)
$
5,212
$
(98,372
)
$
3,700
A reconciliation of the statutory U.S. federal income tax
    rate to the effective rates is as follows:
December 31,
2008
2007
2006
Federal Income Tax at Statutory Rate
34.0
%
34.0
%
34.0
%
State Tax Provision, Net of Federal Benefit
—
%
(0.3
)%
(0.2
)%
Meals and Entertainment
(0.3
)%
(0.3
)%
(0.8
)%
Stock Compensation Expense
(1.3
)%
(1.2
)%
(0.9
)%
Research and Development Credits
(2.1
)%
(2.5
)%
(6.2
)%
Other
—
%
—
%
(0.2
)%
Effective Tax Rate
30.3
%
29.7
%
25.7
%
Change in Valuations Allowance
(30.3
)%
(29.7
)%
(25.7
)%
Net Effective Tax Rate
—
%
—
%
—
%
F-18
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Deferred tax assets (liabilities) consist of the following:
December 31,
2008
2007
Assets
Current
Inventory and Inventory Related Items
$
68,000
$
12,000
Bad Debt and Note Receivable Reserves
1,000
—
Non-Current
Net Operating Loss Carryforwards
1,825,000
1,235,000
Stock Compensation Expense
—
—
Tax Credit Carryforwards
946,000
656,000
Depreciation
—
—
Other
122,000
102,000
Total Gross Deferred Tax Assets
$
2,962,000
$
2,005,000
Valuation Allowance — 100%
(2,962,000
)
(2,005,000
)
Total Net Deferred Tax Assets
$
—
$
—
Liabilities
Current
New York State Refund
$
(19,000
)
$
—
Total Gross Deferred Tax Liabilities
(19,000
)
—
Valuation Allowance — 100%
19,000
—
Total Net Deferred Tax Liability
$
—
$
—
Net Deferred Tax
$
—
$
—
December 31,
2008
2007
Net Current Deferred Tax Assets
$
—
$
—
Net Long-Term Deferred Tax Assets
$
—
$
—
In 2008 and 2007, the Company generated federal and state net
    operating losses for income tax purposes. These federal and
    state net operating loss carryforwards, which total
    approximately $12,200,000 at December 31, 2008 and begin to
    expire in 2018, if not utilized. Of the Company's tax
    credit carryforwards, $946,000 expire between 2017 and 2018, if
    not utilized.
Deferred tax assets, including carryforwards and other
    attributes, are reviewed for expected realization and a
    valuation allowance is established when appropriate to reduce
    the assets to their estimated net realizable value. Expected
    realization of deferred tax assets is dependent upon sufficient
    taxable income in the appropriate jurisdiction and period that
    is also of the appropriate character. The Company has evaluated
    the availability of such taxable income, the nature of its
    deferred tax assets and the relevant tax laws in determining the
    net realizable value of its deferred tax assets.
In addition, the calculation of our tax liabilities involves
    dealing with uncertainties in the application of complex tax
    regulations. As a result of the implementation of FASB
    Interpretation No. 48, "Accounting for Uncertainty in
    Income Taxes" (FIN 48), we recognize liabilities for
    uncertain tax positions based on the two-step process prescribed
    within the interpretation. The first step is to evaluate the tax
    position for recognition by determining if the weight of
    available evidence indicates that it is more likely than not
    that the position will be sustained on audit, including
    resolution of related appeals or litigation processes, if any.
    The second step requires us
F-19
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
to estimate and measure the tax benefit as the largest amount
    that is more than 50% likely of being realized upon ultimate
    settlement. It is inherently difficult and subjective to
    estimate such amounts, as this requires us to determine the
    probability of various possible outcomes. We re-evaluate these
    uncertain tax positions on a quarterly basis. This evaluation is
    based on factors including, but not limited to, changes in facts
    or circumstances, changes in tax law, effectively settled issues
    under audit and new audit activity. Such a change in recognition
    or measurement would result in the recognition of a tax benefit
    or an additional charge to the tax provision in the period.
The following table summarizes the activity in the valuation
    allowance account for 2008 and 2007:
Balance, January 1, 2007
$
1,682,700
Additions Relating to Uncertain Future Realization of
Net Operating Losses
245,500
State Research and Development Tax Credits
76,800
Balance, December 31, 2007
$
2,005,000
Additions Relating to Uncertain Future Realization of
Net Operating Losses
855,000
State Research and Development Tax Credits
102,000
Balance, December 31, 2008
$
2,962,000
Note 14 —
    Preferred Stock
Series A
    Preferred Stock par value $0.001 (Authorized 725,000;
    0 shares issued and outstanding)
Series A preferred stockholders do not have the right to
    vote on any matter submitted to the stockholders of the Company
    for vote, consent, or approval. The Company may at any time
    redeem all or any portion of Series A preferred stock
    outstanding at a price per share equal to the liquidation value.
    The holders of Series A preferred stock may elect to
    require the Company to redeem on or after November 20, 2007
    at the liquidation value of all of the then outstanding shares
    of Series A preferred Stock.
Series B
    Preferred Stock par value $0.001 (Authorized 1,020,681;
    0 shares issued and outstanding)
Holders of Series B preferred stock shall have voting
    rights for all matters voted on by stockholders of the Company.
    Each Series B preferred stockholder shall have that number
    of votes equal to the number of whole common shares into which
    the stockholder's Series B preferred stock could be
    converted on that date. Each share of Series B preferred
    stock shall be convertible, at the option of the holder, into
    fully paid and non-assessable shares of common stock at the
    Conversion Ratio, as defined in the Articles of Incorporation.
    The initial conversion price of Series B preferred stock
    was $0.10.
Series C
    Preferred Stock par value $0.001 (Authorized 500,000;
    168,500 shares issued and outstanding)
Holders of Series C preferred stock shall have voting
    rights for all matters voted on by stockholders of the Company.
    Each Series C preferred stockholder shall have that number
    of votes equal to the number of whole common shares into which
    the stockholder's Series C preferred stock could be
    converted on that date. Each share of 6% Cumulative
    Series C preferred stock shall be convertible, at the
    option of the holder, into 34.29 shares of common stock.
    The Series C preferred stock is redeemable at the option of
    the Company at any time after June 30, 2007 for $10 per
    share plus accrued, unpaid dividends.
F-20
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Preferred
    stock
Shares of undesignated preferred stock may be issued in one or
    more series. The balance of undesignated preferred stock is
    4,500,000 as at December 31, 2008. The Board of Directors
    is authorized to establish and designate the different series
    and to fix and determine the voting powers and other special
    rights and qualifications.
Preferred
    dividends
Cumulative preferred dividends on the Series C series
    totaled $324,299 as of December 31, 2008 and $223,199 as of
    December 31, 2007. These cumulative dividends in arrears
    represented an average $1.92 per share as of December 31,
    2008 and an average of $1.32 per share as of December 31,
    2007. As of March 31, 2009 total accrued dividends were
    $349,574 or an average of $2.07 per share.
Note 15 —
    Stock Split
Effective July 16, 2008, the Company effected a stock split
    of its common stock whereby each one share of Common Stock, par
    value $0.001 per share, of the Company's outstanding stock
    were reclassified and changed into eight shares of Common Stock,
    par value $0.001 per share.
Effective June 28, 2007 the Company effected a reverse
    stock split of its common stock whereby each seven shares of
    Common Stock, par value $0.001 per share, of the Company's
    outstanding stock were reclassified and changed into one share
    of Common Stock, par value $0.001 per share.
Both the stock split and reverse share consolidation affected
    the shares outstanding and pricing for convertible debt, stock
    subscriptions, incentive stock options, stock warrants and
    stockholders' equity disclosures. All share and per-share
    amounts in the accompanying consolidated financial statements
    and notes to the consolidated financial statements have been
    adjusted to apply the effect of the reverse stock split
(one-for-seven)
in 2007 and the forward stock split
(eight-for-one)
in 2008.
Note 16 —
    Stock Warrants
During 2007, the Company issued warrants to purchase
    2,521,656 shares, respectively, of common stock to the
    parties who helped secure financing. The exercise price was
    $0.20 per share.
In exchange for services performed by vendors who worked at a
    reduced rate, warrants were issued during to purchase 380,699
    and 317,032 shares in 2008 and 2007, respectively, of
    common stock. The exercise prices range from $0.00875 to $0.20
    per share.
During 2008, 1,552,936 warrants were exercised at a price of
    $.00875 per share.
The following table shows the various changes in warrants for
    the years December 31, 2008 and 2007.
December 31,
2008
2007
Warrants Outstanding, Beginning of Year
6,171,008
3,509,456
Exercised During the Year
(1,552,936
)
(177,136
)
Issued During the Year
380,699
2,838,688
Forfeited During the Year
—
—
Warrants Outstanding, End of Year
4,998,771
6,171,008
The outstanding warrants as of December 31, 2008 expire
    from August 10, 2010 to December 31, 2013. The
    weighted average remaining contractual term on the warrants is
    2.7 years. The weighted average exercise price is $0.1401
    per share.
F-21
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
During 2006, pursuant to a convertible note payable, a warrant
    was issued that would only be exercisable if the note holder
    converted their note along with any unpaid accrued interest. The
    exercise price if this warrant came into effect would be $0.35
    per share and the warrant would have to be exercised by
    September 30, 2009. Excluding accrued interest, the
    conversion of the principal of the note and exercise of the
    resulting warrant would result in the issuance of up to
    1,071,225 shares. This warrant is not included in the
    totals above.
Note 17 —
    Stock Option Plans
The Company has an Incentive Stock Option Plan (the
    "Plan") that allows for the granting of both Qualified
    and Non-Qualified Stock Options as defined under the Internal
    Revenue Code regulations. The total authorized number of shares
    under the plan is 45,714,286. For Non-Qualified Stock Options,
    the Company may grant options that provide for the issuance of
    Common Shares of $0.001 at prices below fair market value at the
    date of grant. For Qualified Options grants, the option issuance
    price may not be less than fair market value at the date of
    grant. The Plan gives the Board of Directors of the Company the
    ability to determine vesting periods for all options granted
    under the Plan, and allows option terms to be up to ten years
    from the original grant date. Employees' incentive stock
    options must vest at a minimum rate of 20% per year over a five
    year period, commencing on the date of grant. Most vest ratably
    over four years commencing on the date of the option grant. In
    the case of directors, such options are granted annually and
    they expire ten years after the date of their grant and vest
    ratably, on a monthly basis, over the next 12 months.
    Advisors or consultants can have vesting range from
    100 percent of the option grants vesting immediately to
    ratably, on a monthly basis, over the next a period of up to
    48 months.
The following table summarizes stock option activity for the
    three years ended December 31, 2008:
Weighted
Number of
Average
Exercise Price
Shares
Exercise Price
Range
Outstanding at January 1, 2006
11,783,648
$
0.02916
$
0.0061 – $ 0.2334
Granted
1,601,800
$
0.2318
$
0.2275 – $ 0.2334
Exercised
(22,857
)
$
0.02275
$0.02275
Expired or Forfeited
—
—
$     —
Outstanding at December 31, 2006
13,362,591
$
0.05266
$
0.0061 – $ 0.2334
Granted
1,772,584
$
0.2189
$
0.2000 – $ 0.2334
Exercised
(402,483
)
$
0.01137
$
0.0087 – $0.02889
Expired or Forfeited
(185,742
)
$
0.02889
$0.02889
Outstanding at December 31, 2007
14,546,950
$
0.07254
$
0.0061 – $ 0.2334
Granted
1,917,288
$
0.1846
$
0.15 – $   0.20
Exercised
(2,450,888
)
$
0.00694
$
0.0.6123 – $ 008750
Expired or Forfeited
(934,336
)
$
0.1949
$
0.20 – $ 0.2334
Outstanding at December 31, 2008
13,079,014
$
0.0914
$
0.0061 – $ 0.2334
As of December 31, 2008, there were 9,582,619 options that
    were fully vested and exercisable at weighted average exercise
    price of $0.0594 per share. The weighted average remaining
    contractual term on the vested options is 5.7 years.
The unvested balance of 3,496,395 options as of
    December 31, 2008, vest ratably over less than the next
    46 months.
F-22
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
The following tables summarizes stock option information at
    December 31, 2008:
Total Options Outstanding
Weighted average
remaining life
Weighted average
Range of exercise price
Shares
(yrs)
exercise price
$0.0062 to $0.0087
2,995,192
3.58
$
0.0076
$0.0227 to $0.0289
5,105,291
6.07
$
0.0257
$0.1500 to $0.2000
2,644,152
9.66
$
0.1889
$0.2100 to $0.2334
2,334,379
8.10
$
0.2323
13,079,014
6.59
$
0.0914
Exercisable Options Outstanding
Weighted average
remaining life
Weighted average
Range of exercise price
Shares
(yrs)
exercise price
$0.0062 to $0.0087
2,995,192
3.58
$
0.0076
$0.0227 to $0.0289
4,653,140
5.98
$
0.0255
$0.1500 to $0.2000
551,296
9.39
$
0.1935
$0.2100 to $0.2334
1,382,991
7.90
$
0.2322
9,582,619
5.70
$
0.0594
Unvested Options Outstanding
Weighted average
remaining life
Weighted average
Range of exercise price
Shares
(yrs)
exercise price
$0.0062 to $0.0087
—
—
$
—
$0.0227 to $0.0289
452,151
7.00
$
0.1350
$0.1500 to $0.2000
2,092,856
9.73
$
0.1876
$0.2100 to $0.2334
951,388
8.41
$
0.2324
3,496,395
9.02
$
0.1930
The weighted average fair value of options granted during 2008
    was $0.182842 with an aggregate value of $192,632. The weighted
    average fair value of options granted during 2007 was $0.215918
    with an aggregate total value of $224,020. The weighted average
    fair value of options granted during 2006 was $0.231794 with an
    aggregate total value of $246,214. There were no dividends in
    any of the periods.
The number of options for our securities remaining for future
    issuance (excluding options reflected above —
    13,079,014 as of December 31, 2008) is 29,759,011.
Cash received from option exercises in 2008, 2007, and 2006,
    amounted to $16,696, $5,730, and $520, respectively. All of the
    shares issued out of common stock.
No grants, exercises, or forfeitures occurred in the three
    period ending March 31, 2009. The only change was that more
    options vested.
With respect to any non-qualified stock options and incentive
    stock options that are exercised and held for less than one
    year, the Company recognizes a tax benefit upon exercise in an
    amount equal to the tax effect of the difference between the
    option price and the fair market value of the common stock on
    the exercise date.
F-23
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Note 18 —
    Stock-based Compensation Expense
The table below summarizes the impact of outstanding stock
    options on the results of operations for the years ended
    December 31, 2008, 2007 and 2006 under the provisions of
    SFAS No. 123(R):
December 31,
2008
2007
2006
Stock-Based Compensation Expense:
Stock Options
$
180,298
$
111,438
$
18,418
Income Tax Benefit
—
—
—
Net Decrease in Net Income
$
180,298
$
111,438
$
18,418
Decrease in Earnings Per Share:
Basic and Diluted
$
0.0008
$
0.0006
$
0.0001
The Black-Scholes-Merton option pricing model was used to
    estimate the fair value of share-based awards under
    SFAS No. 123(R) as well as for pro forma disclosures
    under SFAS No. 123. The Black-Scholes-Merton option pricing
    model incorporates various and highly subjective assumptions,
    including expected term and expected volatility. For valuation
    purposes, stock option awards were categorized into two groups,
    stock option grants to employees and stock option grants to
    members of the Board of Directors.
The expected term of options granted was estimated to be the
    average of the vesting term, historical exercise and forfeiture
    rates, and the contractual life of the option. The expected
    volatility at the grant date is estimated using historical stock
    prices based upon the expected term of the options granted. The
    risk-free interest rate assumption is determined using the rates
    for U.S. Treasury zero-coupon bonds with maturities similar
    to those of the expected term of the award being valued. Cash
    dividends have never been paid and are not anticipated to be
    paid in the foreseeable future. Therefore, the assumed expected
    dividend yield is zero.
The following table shows the detailed assumptions used to
    compute the fair value of stock options granted during 2008,
    2007 and 2006:
December 31,
2008
2007
2006
Expected Term (Years)
6.25 years
6.25 years
6.25 years
Volatility
60.9%
63.7%
63.7%
Risk Free Interest Rate
4.39%
4.39%
4.49%
SFAS No. 123(R) requires pre-vesting option
    forfeitures at the time of grant to be estimated and
    periodically revised in subsequent periods if actual forfeitures
    differ from those estimates. Stock-based compensation expense is
    recorded only for those awards expected to vest using an
    estimated forfeiture rate based on historical pre-vesting
    forfeiture data.
Unrecognized stock-based compensation expense was approximately
    $360,612 as of December 31, 2008, relating to a total of
    3,496,396 unvested stock options under the Company's stock
    option plans. This stock-based compensation expense is expected
    to be recognized over a weighted average period of approximately
    3.8 years.
Stock-based compensation expense for the three months ending
    March 31, 2009 and 2008 was $40,689 and $46,584,
    respectively.
F-24
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Note 19 —
    Stock Subscriptions Receivable
During the year ended December 31, 2002, the Company's
    Board of Directors authorized to make loans to certain senior
    employees to allow them to participate in a rights offering and
    purchase 32,537,135 shares of common stock at a price of
    $0.0085 per share. While the loans were initially due September,
    2007, the due date was extended to December 2012. The loans bear
    interest at 6% and are shown as stock subscriptions receivable
    in the accompanying consolidated financial statements.
Note 20 —
    Commitments
The Company leases office space under an operating lease
    expiring in December, 2008 requiring monthly payments of $4,200
    plus insurance, taxes and common charges.
The Company leases office space under an operating lease
    expiring in May, 2009 requiring monthly payments of $3,819 plus
    insurance, taxes and common charges.
On June 1, 2007 the Company acquired an operating lease for
    additional office space. The lease expires on June 30, 2010
    and requires monthly payments of $3,973 plus insurance, taxes
    and common charges.
Rent expense for the years ended December 31, 2008, 2007,
    and 2006 totaled $178,657, $161,410, and $95,539, respectively.
Future minimum payments required under operating lease
    obligations are as follows:
Total Minimum
2009
2010
Lease Payments
$
66,765
$
23,835
$
90,600
For the lease agreements described above, the Company is
    required to pay the pro rata share of the real property taxes
    and assessments, expenses and other charges associated with
    these facilities.
Note 21 —
    Employee Benefit Plans
The Company has a Section 401(k) Savings Plan which covers
    employees who meet certain age and length of service
    requirements. To date the plan is comprised of 100% employee
    deferrals.
Note 22 —
    Litigation
The Company is not subject to any legal proceedings or claims at
    the current time. The Company indemnifies its directors and
    officers who are, or were, serving at the Company's request
    in such capacities. The fair value of the indemnifications that
    the Company issued during 2008 was not material to the
    Company's financial position, results of operations or cash
    flows.
Note 23 —
    Product Revenue
The following table represents the Company's total sales
    for 2008, 2007 and 2006 classified by product category:
December 31,
2008
2007
2006
Consumer Video Eyewear
$
4,451,121
$
3,282,755
$
2,022,623
Defense Products
6,471,824
1,418,249
4,888,243
Engineering Services
1,548,703
5,445,375
2,627,442
Low Vision Products
92,839
—
—
Total
$
12,564,487
$
10,146,379
$
9,538,308
F-25
Table of Contents
VUZIX
    CORPORATION AND SUBSIDIARY
NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS — (Continued)
Note 24 —
    Concentrations
For 2008, 2007, and 2006, one customer accounted for
    approximately 20%, 17% and 42% of sales, respectively and sales
    to the U.S. government accounted for approximately 12% 54%,
    and 27%, respectively.
Accounts receivable from the U.S. government accounted for
    31% and 19% of accounts receivable at December 31, 2008 and
    2007, respectively and the other one customer mentioned above
    represented 6% and 39% of accounts receivable at
    December 31, 2008 and 2007, respectively.
Note 25 —
    Related Party Transactions
During 2008, $2,472,824 and $827,307 of revenues and purchases,
    respectively were derived from a minority stockholder (less than
    5%) of the Company who also represented $90,606 of the accounts
    receivable balance and $— nil of the accounts payable
    balance at December 31, 2008.
During 2007, $1,737,285 and $2,009,500 of revenues and
    purchases, respectively were derived from a minority stockholder
    (less than 5%) of the Company who also represented $1,145,472 of
    the accounts receivable balance and $1,493,956 of the accounts
    payable balance at December 31, 2007.
During 2006, $4,006,324 and $620,727 of revenues and purchases,
    respectively were derived from a minority stockholder (less than
    5%) of the Company who also represented $359,068 of the accounts
    receivable balance and $164,510 of the accounts payable balance
    at December 31, 2006.
Included in long-term debt is a note payable to an officer of
    the Company. Interest expense related to the note payable amount
    to $16,737 for the years ended December 31, 2008 and 2007.
    Total accrued interest on the note payable was $100,449 as of
    December 31, 2008. See Note 11 for details.
Included in long-term debt are bridge loans payable and
    convertible notes payable to related parties, minority
    stockholders owning less than 1% of the Company. Interest
    expense related to these loans payable amounted to $48,717,
    $40,085, and $32,056 for the years ended December 31, 2008,
    2007 and 2006, respectively.
The Company has accrued compensation owed to officers of the
    Company. Interest expense related to accrued compensation
    amounts to $35,608, $35,608 and $24,808 for the years ended
    December 31, 2008, 2007 and 2006, respectively. Total
    accrued interest on the accrued compensation was $154,753 as of
    December 31, 2008. See Note 10 for details.
Note 26 —
    Prior-Period Restatements
The accompanying consolidated financials for 2007 have been
    restated to correct errors recognized after their initial
    release. These changes include the correction of the warranty
    reserve of $73,064; a reduction of depreciation expense of
    $15,346; and the accrual of an income tax benefit from research
    and development tax credits of $130,130. The effect of these
    restatements is an overall decrease in the net loss in the
    amount of $72,412 for 2007. There was also a reclassification of
    expenses of $499,237 between the cost of sales and operating
    expense classifications for consistency across the periods. This
    had no effect on the reported net loss.
F-26
Table of Contents
Table of Contents
Up
    to • Units
PROSPECTUS
Until          ,
    2009, all dealers that effect transactions in these securities,
    whether or not participating in this offering, may be required
    to deliver a prospectus. This requirement is in addition to the
    dealers' obligation to deliver a prospectus when acting as
    agents and with respect to their unsold allotments or
    subscriptions.
,
    2009
Table of Contents
Alternate page for Canadian Prospectus
A copy of
    this preliminary prospectus has been filed with the securities
    regulatory authorities in each of the provinces of Canada other
    than Québec but has not yet become final for the purpose of
    the sale of securities. Information contained in this
    preliminary prospectus may not be complete and may have to be
    amended. The securities may not be sold until a receipt for the
    prospectus is obtained from the securities regulatory
    authorities.
This prospectus constitutes a
    public offering of these securities only in those jurisdictions
    where they may be lawfully offered for sale and therein only by
    persons permitted to sell such securities. No securities
    regulatory authority has expressed an opinion about these
    securities and it is an offence to claim otherwise. Vuzix
    Corporation has filed a registration statement on
Form S-1
with the United States Securities and Exchange Commission under
    the United States Securities Act of 1933, as amended, with
    respect to these securities. See "Plan of
    Distribution".
PRELIMINARY PROSPECTUS
Initial
    Public
    Offering
June 30,
    2009
VUZIX CORPORATION
UP TO
    CDN$
l
Up
    to
l
Units
(each Unit consisting of one share of common stock and
    one-half of one common stock purchase warrant)
This prospectus qualifies the
    distribution (the "Offering") of up
    to
l
units (the "Units") in the capital of Vuzix
    Corporation ("Vuzix", the "Company",
    "us" or "we"), at a price of
    Cdn$
l
per Unit (the "Offering Price"). Each Unit is
    comprised of one share of our common stock, with a par value of
    US$0.001 per share (each, a "Share" and collectively,
    the "Shares") and one-half of one common stock
    purchase warrant (each whole warrant being a
    "Warrant"). The Warrants will be created and issued
    pursuant to the terms of a warrant indenture (the "Warrant
    Indenture") dated as of the closing date between us and
    Computershare Trust Company of Canada, as warrant agent
    thereunder. Each Warrant will entitle its holder to purchase one
    share of our common stock at a price of
    Cdn$
l
per share at any time
    for
l
months after the closing date of the Offering. The Units are
    being offered concurrently in each of the provinces of Canada
    other than Québec pursuant to this prospectus and in the
    United States pursuant to a registration statement on
Form S-1
(the "U.S. Prospectus") filed with the United States
    Securities and Exchange Commission. The full text of the U.S.
    Prospectus is included in and forms a part of this prospectus.
    We have engaged Canaccord Capital Corporation and Bolder
    Investment Partners, Ltd. (collectively,
    the "Agents") to act as our agents in connection
    with the sale of the Units on a best efforts basis. Subject to
    compliance with applicable laws, the Offering Price of the
    Units will be determined by negotiation between us and the
    Agents. In connection with the Offering, the Agents may
    over-allot or effect transactions which stabilize or maintain
    the market price of the shares at levels other than those which
    may otherwise exist in the open market.
    See "Plan of Distribution".
There is currently no market
    through which the Units or the Shares and Warrants comprising
    the Units may be sold and purchasers may not be able to resell
    the Shares or Warrants purchased under this prospectus. This may
    affect the pricing of the securities in the secondary market,
    the transparency and availability of trading prices, the
    liquidity of the securities and the extent of issuer regulation.
    An investment in the Units is subject to a number of risks that
    should be considered by a prospective purchaser. Investors
    should carefully consider the risk factors described under
    "Risk Factors" in the U.S. Prospectus before
    purchasing the Units. We have applied to list the shares of our
    common stock (including the Shares) on the TSX Venture Exchange
    (the
"TSX-V").
Listing will be subject to us fulfilling all of the listing
    requirements of the
TSX-V.
We do
    not intend to list the Warrants on the
TSX-V
or any
    other securities exchange.
PRICE
    CDN$
l
PER UNIT
Price to the Public
Agents'
    Commissions
(1),(2)
Net Proceeds to
    Vuzix
(3)
Per Unit
Cdn$
l
Cdn$
l
Cdn$
l
Total
    Offering
(4)
Cdn$
l
Cdn$
l
Cdn$
l
Notes
(1)
We have retained the Agents to solicit subscriptions for the
    Units on a best efforts basis. As consideration for their
    services, the Agents will receive: (i) a commission equal
    to 8% of the gross proceeds of the Offering; (ii) options
    (the "Compensation Options") entitling the Agents to
    purchase that number of Shares and Warrants equal to 12.5% of
    the aggregate number of Shares and Warrants sold under the
    Offering (including the Shares and Warrants issued upon exercise
    of the Over-Allotment Option), at the Offering Price per Share
    and Warrant, for a period of 12 months from the closing
    date; and (iii) a due diligence fee of Cdn$15,000. The
    Agents will also be reimbursed for their reasonable fees and
    expenses including the reasonable legal fees and disbursements
    of legal counsel to the Agents. This prospectus also qualifies
    the distribution of that number of Compensation Options
    entitling the Agents to acquire up to 10% of the Shares and
    Warrants sold under the Offering (including pursuant to the
    exercise of the Over-Allotment Option referred to below). The
    distribution of the balance of the Compensation Options
    (entitling the Agents to acquire up to 2.5% of the number of
    Shares and Warrants sold under the Offering) is not qualified
    under this prospectus and such securities will be issued to the
    Agents pursuant to exemptions from the prospectus and
    registration requirements of applicable securities legislation
    and will be subject to resale restrictions under applicable
    securities legislation.
(2)
In consideration of certain fiscal advisory services rendered by
    the Agents to us pursuant to a fiscal advisory fee agreement
    between us and the Agents dated June 29, 2009 (the
    "Fiscal Advisory Fee Agreement"), we have agreed to
    issue to the Agents that number of shares of our common stock
    equal to, depending on the gross proceeds of the Offering,
    between 1.0% and 2.0% of the number of issued and outstanding
    shares of our common stock outstanding on the closing of the
    Offering. The distribution of these shares to the Agents
    pursuant to the Fiscal Advisory Fee Agreement is not qualified
    by this prospectus. Such shares will be issued pursuant to
    exemptions from the prospectus and registration requirements of
    applicable securities legislation and will be subject to resale
    restrictions under applicable securities legislation. See
    "Material Contracts".
(3)
Before deducting the expenses of the Offering estimated at
    Cdn$
l
which, together with the Agents' commission and fees, will
    be paid by us out of the proceeds of the Offering.
(4)
We have granted the Agents an over-allotment option (the
    "Over-Allotment Option"), exercisable in whole or in
    part at any time for a period of 30 days from the date of
    the closing of the Offering, to sell up to an aggregate number
    of additional Shares and Warrants, up to the lesser of the
    Agents' over-allocation position determined at the time of
    closing of the Offering
    and
l
Shares
    and
l
Warrants (15% of the number of Shares and whole Warrants offered
    by us under this prospectus) or any combination thereof at a
    price of
    Cdn$
l
per Share and
    Cdn$
l
per Warrant. For greater clarity, these Warrants will only be
    issued upon exercise of the Over-Allotment Option for the
    purpose of distribution of Units to purchasers. The aggregate
    number of Shares and Warrants issuable to purchasers pursuant to
    the Offering shall not
    exceed
l
Shares
    and
l
Warrants, respectively. The Over-Allotment Option and the Shares
    and Warrants issuable on exercise thereof are qualified for
    distribution under this prospectus regardless of whether the
    over-allocation position is ultimately filled through the
    exercise of the Over-Allotment Option or secondary market
    purchases. If the Over-Allotment Option is exercised in full,
    the aggregate price to the public, the Agents' commission
    and the net proceeds to Vuzix will be
    Cdn$
l
,
    Cdn$
l
and
    Cdn$
l
,
    respectively. The expenses associated with any exercise of the
    Over-Allotment Option, together with the Agents'
    commission, will be paid by us. See "Plan of
    Distribution".
(Continued on the next
    page)
Table of Contents
Alternate page for Canadian Prospectus
(Continued from previous
    page)
As of the date hereof, we are an "IPO Venture Issuer"
    (defined under National Instrument
41-101
as an
    issuer that does not have any of its securities listed or
    quoted, has not applied to list or quote any of its securities,
    and does not intend to apply to list or quote any of its
    securities, on the Toronto Stock Exchange, a U.S. marketplace,
    or a marketplace outside of Canada and the United States of
    America other than the Alternative Investment Market of the
    London Stock Exchange or the PLUS markets operated by PLUS
    Markets Group plc.). See "Risk Factors" in the U.S.
    Prospectus. In connection with this Offering, the Agents may,
    subject to applicable laws, over-allot or effect transactions
    that stabilize or maintain the price of the Shares at levels
    other than those which otherwise might prevail on the open
    market. See "Plan of Distribution".
The following table summarizes the options granted by us to the
    Agents pursuant to the Offering:
Maximum Number of
Agents' Position
Securities Held
Exercise Period
Exercise Price
Over-Allotment
    Option
(1)
l
Shares
30 days from the closing
l
per
    Share
l
Warrants
of the Offering
l
per
    Warrant
Compensation
    Options
(1),(2)
12.5% of the number of
12 months from the
$
l
per Unit
Shares and Warrants sold
closing of the Offering
under the Offering
(including upon exercise of
the Over-Allotment Option)
Total Securities under Option
l
Notes
(1)
Assuming exercise in full of the Over-Allotment Option.
(2)
This prospectus also qualifies the distribution of that number
    of Compensation Options entitling the Agents to acquire up to
    10% of the Shares and Warrants sold under the Offering
    (including the Shares and Warrants issued upon exercise of the
    Over-Allotment Option). The distribution of the balance of the
    Compensation Options (entitling the Agents to acquire up to 2.5%
    of the number of Shares and Warrants sold under the Offering) is
    not qualified under this prospectus and such portion of the
    Compensation Options will be issued to the Agents pursuant to
    exemptions from the prospectus and registration requirements of
    applicable securities legislation and will be subject to resale
    restrictions under applicable securities legislation.
A purchaser who acquires Shares or Warrants forming part of the
    Agents' over-allocation position acquires those Shares and
    Warrants under this prospectus, regardless of whether the
    over-allocation position is ultimately filled through the
    exercise of the Over-Allotment Option or secondary market
    purchases. See "Plan of Distribution".
The Agents, as agents on behalf of the Company, conditionally
    offer the Units qualified under this prospectus, subject to
    prior sale, if, as and when issued by us and accepted by the
    Agents in accordance with the conditions contained in the agency
    agreement referred to under "Plan of Distribution" and
    subject to the approval of certain legal matters on our behalf
    by Wildeboer Dellelce LLP as to certain matters of Canadian law
    and Boylan, Brown, Code, Vigdor & Wilson, LLP as to
    certain matters of U.S. law and on behalf of the Agents by
    McCullough O'Connor Irwin LLP as to certain matters of
    Canadian law and Dorsey & Whitney LLP as to certain
    matters of U.S. law. The Agents may offer the Units at prices
    lower than stated above. See "Plan of Distribution".
The financial statements included in this prospectus have not
    been prepared in accordance with Canadian generally accepted
    accounting principles and may not be comparable to financial
    statements of a Canadian issuer. See "Notice to Investors
    Regarding GAAP".
Subscriptions will be received subject to rejection or allotment
    in whole or in part, and the Agents reserve the right to close
    the subscription books at any time without notice. It is
    expected that the closing of the Offering will occur on or
    about
l
,
    2009 or such other date as the Company and the Agents may agree,
    which in any event shall not be later
    than
l
,
    2009. One or more book-entry only certificates representing the
    Shares and the Warrants, respectively, to be issued or sold in
    this Offering will be issued in registered form to The Canadian
    Depository for Securities Limited ("CDS"), or to its
    nominee, and will be deposited with CDS on the date of closing.
    A purchaser of the Units will receive only a customer
    confirmation from the registered dealer through which the Units
    are purchased.
Vuzix is incorporated, continued or otherwise organized under
    the laws of a foreign jurisdiction. Although we have appointed
    Wildeboer Dellelce Corporate Services Inc. as our agent for
    service of process in Toronto, Ontario, it may not be possible
    for investors to enforce judgments obtained in Canada against
    us. See "Enforcement of Legal Rights".
Unless the context requires otherwise, references to the
    "Company", "Vuzix", "we",
    "us", or "our" refer to Vuzix Corporation
    and its subsidiary.
CDN-2
Alternate page for Canadian Prospectus
TABLE OF
    CONTENTS
Page
CURRENCY AND EXCHANGE RATE DATA
CDN-3
NOTICE TO INVESTORS REGARDING GAAP
CDN-3
CONTINUOUS DISCLOSURE
CDN-3
ENFORCEMENT OF LEGAL RIGHTS
CDN-4
CERTAIN CANADIAN FEDERAL INCOME TAX
    CONSIDERATIONS
CDN-4
AUDITORS, TRANSFER AGENTS &
    REGISTRARS
CDN-7
PLAN OF DISTRIBUTION
CDN-7
PRIOR SALES
CDN-9
MATERIAL CONTRACTS
CDN-10
ELIGIBILITY FOR INVESTMENT
CDN-10
PURCHASERS' STATUTORY RIGHTS
CDN-11
UNITED STATES PROSPECTUS
CDN-11
CERTIFICATE OF VUZIX CORPORATION
CDN-C-1
CERTIFICATE OF THE AGENTS
CDN-C-2
CURRENCY
    AND EXCHANGE RATE DATA
We measure and report our financial results in U.S.
    dollars.
The following table sets forth, for the periods
    indicated, the high, low, average and period-end noon buying
    rates of exchange for one U.S. dollar in Canadian dollars
    published by the Bank of Canada. Although obtained from sources
    believed to be reliable, the data is provided for informational
    purposes only, and the Bank of Canada does not guarantee the
    accuracy or completeness of the data. No representation is made
    that the U.S. dollar amounts have been, could have been or could
    be converted into Canadian dollars at the noon buying rate on
    such dates or any other dates.
Year Ended December 31
Period Ended March 31
2008
2007
2006
2009
2008
Highest rate during period
$
1.2969
$
1.1853
$
1.1726
$
1.3000
$
1.0324
Lowest rate during period
0.9719
0.9170
1.0990
1.1823
0.9719
Average rate during period
1.0660
1.0748
1.1342
1.2456
1.0042
Rate at the end of period
1.2246
0.9881
1.1653
1.2602
1.0279
On June 29, 2009, the noon buying rate of the Bank of
    Canada was U.S.$1.00 = Cdn$1.1583.
Unless otherwise
    specified, all references to "dollars",
    "U.S.$" or "$" in this prospectus are to
    United States dollars and references to "Cdn$" in this
    prospectus are to Canadian dollars.
NOTICE TO
    INVESTORS REGARDING GAAP
The financial statements included in this prospectus have been
    prepared in accordance with U.S. generally accepted accounting
    principles which differ in certain material respects from
    Canadian generally accepted accounting principles. As we will
    become an "SEC issuer" (as such term is defined in
    National Instrument
52-107
of
    the Canadian Securities Administrators), we are not required to
    provide, and have not provided, a reconciliation of our
    financial statements to Canadian generally accepted accounting
    principles.
CONTINUOUS
    DISCLOSURE
Upon the filing of the final prospectus with the securities
    regulatory authorities in each of the provinces of Canada other
    than Québec we will become a reporting issuer under the
    securities laws of such jurisdictions that provide for a
    reporting issuer regime. Pursuant to the rules of the securities
    regulatory authorities of such jurisdictions, we (or, in the
    case of insider reporting, our insiders) are generally exempt
    from the requirements of the laws of such jurisdictions relating
    to continuous disclosure, proxy solicitation and insider
    reporting. These rules generally permit us to comply with
    certain informational requirements applicable in the United
    States instead
CDN-3
Table of Contents
Alternate page for Canadian Prospectus
of the continuous disclosure requirements normally applicable in
    such Canadian jurisdictions, provided that the relevant
    documents are filed with the securities regulatory authorities
    in the relevant Canadian jurisdictions and are provided to
    security holders in Canada to the extent and in the manner and
    within the time required by applicable U.S. requirements.
ENFORCEMENT
    OF LEGAL RIGHTS
We are incorporated under the laws of the State of Delaware in
    the United States of America and, accordingly, the rights and
    remedies generally available to shareholders under Canadian
    corporate statutes will not be available to investors who
    purchase under this prospectus. In addition, substantially all
    of our assets are located outside of Canada. Although we have
    appointed Wildeboer Dellelce Corporate Services Inc. as our
    agent for service of process in Ontario, it may not be possible
    for investors to collect from the Company judgments obtained in
    courts in Canada predicated on the civil liability provisions of
    applicable securities legislation in Canada.
In addition, a majority of our directors and officers and
    certain of the experts named in this prospectus reside outside
    of Canada. Furthermore, substantially all of the assets of such
    persons may also be located outside of Canada. It may not be
    possible for investors to effect service of process within
    Canada upon these directors and officers and experts referred to
    above. In addition, it may not be possible to enforce against
    the Company's directors and officers or certain of the
    experts named in this prospectus judgments obtained in Canadian
    courts predicated upon the civil liability provisions of
    applicable securities legislation in Canada.
CERTAIN
    CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following is, as of the date hereof, a summary of the
    principal Canadian federal income tax considerations generally
    applicable to a holder of Shares and Warrants:
•
who is or is deemed to be a resident of Canada,
•
who deals at arm's length with us,
•
who is not affiliated with us,
•
an interest in which would not be a "tax shelter
    investment" under the
Income Tax Act
(Canada) (the
    "Tax Act"),
•
who is not a "financial institution" or other taxpayer
    to which the "mark to market" rules in the Tax Act
    apply,
•
who holds all Shares and Warrants solely as capital property,
•
who does not determine its "Canadian tax results" in a
    "functional currency", each as defined in the Tax Act,
    and
•
for whom we are not at any material time a "foreign
    affiliate" for the purposes of the Tax Act,
at all material times for the purposes of the Tax Act.
A Share or a Warrant will generally be considered capital
    property of a holder unless the holder holds the Share or
    Warrant in the course of carrying on a business of buying and
    selling shares or warrants, or acquired the Shares or Warrants
    in a transaction or transactions considered to be an adventure
    in the nature of trade.
This summary is of a general nature only and is not
    exhaustive of all Canadian federal income tax considerations
    that may be relevant to a particular holder. It is not, and
    should not be construed as, legal or tax advice to any
    particular holder. Consequently each holder is urged to consult
    the holder's own tax advisers with respect to the legal and
    tax consequences applicable to the holder's
    circumstances.
This summary is based on the current provisions of the Tax Act
    and regulations thereunder in force as at the date hereof, all
    specific proposals to amend the Tax Act and regulations
    thereunder (the "Proposed Amendments"), publicly
    announced by or on behalf of the Minister of Finance (Canada)
    prior to the date hereof, and counsel's
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understanding of the current published administrative policies
    and assessing practices of the Canada Revenue Agency (the
    "CRA"). This summary assumes that the Proposed
    Amendments will be enacted as currently proposed, and that there
    will be no other material change to any relevant law or
    administrative practice, although no assurance can be given in
    these respects.
Except as otherwise indicated, this summary does not take into
    account or anticipate any change in any applicable law, and does
    not take into account any provincial, territorial or foreign tax
    law nor any income or other tax treaty, any of which may give
    rise to considerations that differ significantly from the
    Canadian federal income tax considerations discussed herein.
Currency
For the purposes of the Tax Act, each amount relating to a
    share, including dividends, adjusted cost bases and proceeds of
    disposition, must be expressed in Canadian dollars. Any relevant
    amount denominated in U.S. dollars generally must be converted
    into Canadian dollars based on the prevailing U.S. dollar
    exchange rate at the relevant time. Holders may therefore
    realize additional income, gains or losses by virtue of changes
    in foreign currency exchange rates.
Acquisition
    of Shares and Warrants
The total Offering Price of a Unit to a holder must be allocated
    on a reasonable basis between the Share and the one-half of one
    Warrant to determine the cost of each for purposes of the Tax
    Act. For our purposes, we intend to allocate
    Cdn$
l
of the Offering Price of each Unit as consideration for the
    issue of each Share and
    Cdn$
l
of the issue price of each Unit for the issue of each one-half
    of one Warrant. Although we believe that this allocation is
    reasonable, it is not binding on the CRA or the holder. The
    holder's adjusted cost base of each Share comprising a part
    of each Unit will be determined by averaging the cost allocated
    to the Shares acquired pursuant to the offering with the
    adjusted cost base to the holder of all Shares owned by the
    holder immediately prior to such acquisition.
Exercise
    of Warrants
No gain or loss will be realized by a holder upon the exercise
    of a Warrant. When a Warrant is exercised, the holder's
    cost of the share of common stock acquired thereby will be the
    aggregate of the holder's adjusted cost base of such
    Warrant and the exercise price paid for the share of our common
    stock. The holder's adjusted cost base of the common stock
    so acquired will be determined by averaging such cost with the
    adjusted cost base to the holder of all shares of our common
    stock owned by the holder immediately prior to such acquisition.
Disposition
    and Expiry of Warrants
A disposition or deemed disposition by a holder of a Warrant
    (other than upon the exercise thereof) will generally give rise
    to a capital gain (or capital loss) equal to the amount by which
    the proceeds of disposition, net of any reasonable costs of
    disposition, are greater (or less) than such holder's
    adjusted cost base of the Warrants. In the event of the expiry
    of an unexercised Warrant, the holder will realize a capital
    loss equal to the holder's adjusted cost base of such
    Warrant. The tax treatment of capital gains and capital losses
    is discussed in greater detail below under the subheading
    "Capital Gains and Capital Losses".
Disposition
    of Shares
A holder who disposes or is deemed to dispose of a share of our
    common stock generally will realize a capital gain (or capital
    loss) equal to the amount by which the proceeds of disposition
    of the share, less reasonable costs of disposition, exceed (or
    are less than) the adjusted cost base of such share to the
    holder. The tax treatment of capital gains and capital losses is
    discussed in greater detail below under the subheading
    "Capital Gains and Capital Losses".
Capital
    Gains and Capital Losses
The holder must include one half of any capital gain
    ("taxable capital gain") realized by a holder in
    income, and may deduct one half of any capital loss
    ("allowable capital loss") against taxable capital
    gains realized by a holder in
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the same year subject to the detailed rules in the Tax Act
    limiting the deduction of capital losses . The holder may deduct
    any excess of allowable capital losses against any net taxable
    capital gains realized in any of the three preceding taxation
    years or any subsequent taxation year, to the extent and under
    the circumstances permitted in the Tax Act. A holder resident in
    Canada who realizes a capital gain on the disposition of the
    Shares and pays United States tax as a result of the disposition
    may be eligible to claim a foreign tax credit or deduction under
    the Tax Act in respect of the United States tax payable to the
    extent and under the circumstances described in the Tax Act.
A holder that is a "Canadian-controlled private
    corporation" for the purposes of the Tax Act may be liable
    to pay an additional refundable tax of
    6
2
/
3
%
    on its "aggregate investment income" for the year,
    which will include any net taxable capital gains. Capital gains
    realized by a holder who is an individual (including most
    trusts) may be subject to alternative minimum tax.
Dividends
    on Shares
A holder will be required to include in income the gross amount
    of any dividend, including amounts deducted for any United
    States or other foreign withholding tax that may be levied on
    the dividend, that the holder receives, or is deemed to receive,
    on a share of common stock. The holder, if an individual
    (including a trust), will not be entitled to the
gross-up
and
    dividend tax credit rules normally applicable to dividends
    received by individuals from taxable Canadian corporations. If
    the holder is a corporation, the holder will not be entitled to
    deduct the amount of the dividend in computing its taxable
    income.
The holder will, subject to the detailed rules in the Tax Act
    governing foreign tax credits and deductions in respect of
    foreign taxes, generally be entitled to claim a foreign tax
    credit against federal Canadian income tax, or a deduction in
    computing income, or both a foreign tax credit and a deduction,
    in respect of any United States or other foreign withholding tax
    levied on any such dividend.
Holders are advised to consult their own tax advisers with
    respect to the availability of a foreign tax credit or deduction
    in respect of any dividend received or deemed to be received on
    a share of common stock.
A holder that is a "Canadian-controlled private
    corporation" for the purposes of the Tax Act may be liable
    to pay an additional refundable tax of
    6
2
/
3
%
    on its "aggregate investment income" for the year,
    which will include dividends on the common stock.
Foreign
    Property Information Reporting
The Tax Act imposes information reporting requirements on most
    Canadian residents who hold "specified foreign
    property" having an aggregate cost amount of Cdn$100,000 at
    any time in a taxation year or fiscal period. The Shares will be
    specified foreign property for these purposes. Each holder
    should consult the holder's own tax advisers to determine
    whether the holder is or may be subject to these reporting
    requirements.
Proposals Regarding
    Foreign Investment Entities
The Proposed Amendments contain provisions that relate to the
    taxation of certain interests held by Canadian residents in
    certain non-resident entities, applicable for taxation years
    commencing after 2006 (the "FIE Proposals"),
    notwithstanding that they have yet to be passed into law.
    However, the January 27, 2009 Federal Budget announced that
    the Government of Canada will review the existing FIE Proposals
    in light of submissions that it has received before proceeding
    with measures in the area.
Under the FIE Proposals, where a Canadian resident holds an
    interest such as a Share or rights to acquire shares (such as
    the Warrants), other than an "exempt interest", in a
    corporation that is a "foreign investment entity"
    (a "FIE") at the corporation's taxation
    year-end (as each of such terms is defined in the FIE
    Proposals), the Canadian resident generally will be required to
    include in computing income for the Canadian resident's
    taxation year that includes such year-end an amount in respect
    of such interest computed in one of three ways: (a) an
    imputed return calculated as a prescribed percentage of the
    holder's "designated cost" of such interest;
    (b) in certain circumstances, the annual accrued increase
    or decrease in the fair market value of the holder's
    interest; or (c) in certain other limited circumstances, a
    proportionate share of the FIE's income or loss for the
    year calculated using Canadian tax rules as specified in the FIE
    Proposals. For most holders, the method described in
    (a) would be applicable.
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We will not, however, be a FIE at the end of a taxation year
    provided that either: (a) at such time, the "carrying
    value" of all of our "investment property" will
    not be greater than one-half of the "carrying value"
    of all our property; or (b) throughout the relevant
    taxation year, our principal undertaking will have been the
    carrying on of a business that is not an "investment
    business". No assurances can be given that we will not be a
    FIE at the end of any of our taxation years or at any other
    times.
Even if we were a FIE for purposes of the FIE Proposals at the
    end of a taxation year, if the Shares or Warrants qualified as
    "exempt interests" for a particular holder at that
    time, the FIE Proposals would not apply in respect of such
    holder's Shares or Warrants, respectively. Generally, under
    the FIE Proposals, the Shares or Warrants would be an
    "exempt interest" to a particular Holder at the end of
    a particular taxation year if: (a) it was reasonable to
    conclude that the holder had no "tax avoidance motive"
    in respect of the Shares or Warrants, respectively, at that
    time; (b) throughout such period the Shares or Warrants,
    respectively, were an "arm's length interest" of
    the holder; and (c) throughout such period either
    (i) the Shares or Warrants, respectively, were listed on a
    designated stock exchange for the purposes of the Tax Act (which
    currently includes the
TSX-V)
or
    (ii) we were governed by and existed under the laws of a
    state of the United States and were a resident of the United
    States for the purposes of the
Canada-United
States Tax Convention (1980).
Holders should consult their own tax advisors regarding the FIE
    Proposals generally in respect of the Shares and Warrants,
    including the determination of whether or not they have a
    "tax avoidance motive" and whether or not the Shares
    or Warrants may at any time constitute an "exempt
    interest" to a holder.
If we were a FIE, the FIE Proposals include complex provisions
    to relieve against double taxation of dividend received and
    amounts included in income under the FIE Proposals. Holders
    should consult their own tax advisors in this regard.
AUDITORS,
    TRANSFER AGENTS & REGISTRARS
Our auditors are Rotenberg & Co. LLP, an independent
    registered public accounting firm, located in Rochester, New
    York.
The main transfer agent and registrar for our common stock is
    Computershare Trust Company, N.A. at its principal office
    located in Golden, Colorado. The co-transfer agent and registrar
    for our common stock is Computershare Investor Services, Inc. at
    its principal office located in Toronto, Ontario. The warrant
    agent for our Warrants is Computershare Trust Company of Canada
    at its principal office located in Toronto, Ontario.
PLAN OF
    DISTRIBUTION
We will enter into an agency agreement with the Agents with
    respect to the Units being offered by us. For a description of
    the terms of the agency agreement, see "Underwriting"
    in the U.S. Prospectus. This section supplements the disclosure
    contained under "Underwriting" in the U.S. Prospectus.
The obligations of the Agents may be terminated at their
    discretion on the basis of their assessment of the state of the
    financial markets and may also be terminated upon the occurrence
    of certain stated events.
The Offering is being made concurrently in the United States and
    each of the provinces of Canada other than Québec. The
    Units will be offered in the United States through those Agents
    who are registered to offer the Units for sale in the United
    States, either directly or indirectly through their U.S.
    broker-dealer affiliates, or such other registered dealers as
    may be designated by the Agents. The Units will be offered in
    each of the provinces of Canada other than Québec through
    those Agents who are registered to offer the Units for sale in
    such provinces. Subject to applicable law, the Agents may offer
    the Units outside of the United States and Canada.
The Warrants will be created and issued pursuant to the terms of
    the Warrant Indenture to be dated as of the closing date between
    us and Computershare Trust Company of Canada, as warrant
    agent thereunder. The Warrant Indenture will, among other
    things, include provisions for the appropriate adjustment in the
    class, number and price of the Shares to be issued upon exercise
    of the Warrants upon the occurrence of certain events, including
    any subdivision, consolidation or reclassification of the shares
    of our common stock, the payment of stock dividends
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and any amalgamation, arrangement or merger. No fractional
    shares will be issued upon exercise of the Warrants. The Shares
    issuable upon exercise of the Warrants, when issued upon
    exercise of a Warrant, will be fully paid and non-assessable.
    The holder of a Warrant will not possess any rights as a
    shareholder until the holder exercises the Warrant. A Warrant
    may be exercised upon surrender of the certificate representing
    such Warrant on or before the expiry date of the Warrant at the
    office of the warrant agent, with the exercise form found on the
    back of the Warrant certificate completed and executed as
    indicated, accompanied by payment of the exercise price (by
    money order, wire transfer, bank draft or certified cheque
    payable to the order of "Vuzix Corporation") for the
    number of shares of our common stock with respect to which the
    Warrant is being exercised. The foregoing discussion of material
    terms and provisions of the Warrants is qualified in its
    entirety by reference to the detailed provisions of the Warrant
    Indenture, a copy of which will be available on
www.sedar.com
and a copy of which may be obtained
    by contacting us.
Pursuant to policy statements of certain Canadian provincial
    securities commissions and the Universal Market Integrity Rules
    for Canadian Marketplaces, the Agents may not, throughout the
    period of distribution, bid for or purchase Shares or Warrants
    except in accordance with certain permitted transactions,
    including market stabilization and passive market making
    activities. Subject to the foregoing, the Agents may engage in
    stabilizing transactions, which involve making bids for,
    purchasing and selling the Shares or Warrants in the open market
    for the purpose of preventing or retarding a decline in the
    market price of our Shares or Warrants while the Offering is in
    progress. These stabilizing transactions may include making
    short sales of the Units or Shares, which involve the sale by
    the Agents of a greater number of the Shares or Warrants than
    are being sold in the Offering. Short sales may be
    "covered" shorts, which are short positions in an
    amount not greater than the Agents' Over-Allotment Option,
    or may be "naked" shorts, which are short positions in
    excess of that amount. The Agents may close out any covered
    short position either by exercising their Over-Allotment Option,
    in whole or in part, or by purchasing the Shares or Warrants in
    the open market. In making this determination, the Agents will
    consider, among other things, the price of the Shares and
    Warrants available for purchase in the open market compared to
    the price at which the Agents may purchase the Shares or
    Warrants through the Over-Allotment Option. A naked short
    position is more likely to be created if the Agents are
    concerned that there may be downward pressure on the price of
    the Shares or Warrants in the open market that could adversely
    affect investors who purchase in the Offering. To the extent
    that the Agents create a naked short position, they will
    purchase the Shares or Warrants in the open market to cover the
    position. These activities may have the effect of raising or
    maintaining the market price of the Shares or Warrants or
    preventing or retarding a decline in the market price of the
    Shares or Warrants, and, as a result, the price of the Shares or
    Warrants may be higher than the price that otherwise might exist
    in the open market. Such transactions, if commenced, may be
    discontinued at any time. The Agents may carry out these
    transactions on the
TSX-V,
in
    the over the counter market or otherwise.
There is no current market through which the Shares or
    Warrants may be sold and purchasers may not be able to resell
    securities purchased under this prospectus. See "Risk
    Factors" in the U.S. Prospectus.
We have applied to
    list the Shares distributed under this prospectus on the
TSX-V.
Listing will be subject to the Company fulfilling all listing
    requirements of the
TSX-V.
As of the date hereof, we are an "IPO Venture Issuer"
    (defined under National Instrument
41-101
as an
    issuer that does not have any of its securities listed or
    quoted, has not applied to list or quote any of its securities,
    and does not intend to apply to list or quote any of its
    securities, on the Toronto Stock Exchange, a U.S. marketplace,
    or a marketplace outside of Canada and the United States of
    America other than the Alternative Investment Market of the
    London Stock Exchange or the PLUS markets operated by PLUS
    Markets Group plc.).
We have granted the Agents the Over-Allotment Option,
    exercisable in whole or in part at any time for a period of
    30 days from the date of the closing of the Offering, to
    sell up to an aggregate number of additional Shares and
    Warrants, equal to the lesser of the Agents'
    over-allocation position determined at the time of closing of
    the Offering
    and
l
Shares
    and
l
Warrants (being 15% of the number of Shares and Warrants offered
    by us under this prospectus) or any combination thereof. For
    greater clarity, these Warrants will only be issued upon
    exercise of the Over-Allotment Option for the purpose of
    distribution of whole Units to purchasers. The aggregate number
    of Shares and Warrants issuable to purchasers pursuant to the
    Offering shall not
    exceed
l
Shares
    and
l
Warrants, respectively. The Over-Allotment Option and the Shares
    and Warrants issuable on exercise thereof are qualified for
    distribution under this prospectus regardless of whether the
    over-allocation position is ultimately filled
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through the exercise of the Over-Allotment Option or secondary
    market purchases. If the Over-Allotment Option is exercised in
    full, the aggregate price to the public, the Agents'
    commission and the net proceeds to Vuzix will be
    $
l
,
    $
l
and
    $
l
,
    respectively. The expenses associated with any exercise of
    the Over-Allotment Option, together with the Agents'
    commission, will be paid by us.
As consideration for their services, the Agents will receive:
    (i) a commission equal to 8% of the gross proceeds of the
    Offering; (ii) Compensation Options entitling the Agents to
    purchase that number of Shares and Warrants equal to 12.5% of
    the aggregate number of Shares and Warrants sold under the
    Offering (including the Shares and Warrants issued upon exercise
    of the Over-Allotment Option), at the Offering Price per Share
    and Warrant, for a period of 12 months from the closing
    date; and (iii) a due diligence fee of Cdn$15,000. The
    Agents will also be reimbursed for their reasonable fees and
    expenses including the reasonable legal fees and disbursements
    of legal counsel to the Agents.
This prospectus also qualifies the distribution of that number
    of Compensation Options entitling the Agents to acquire up to
    10% of the Shares and Warrants sold under the Offering
    (including pursuant to the exercise of the Over-Allotment
    Option). The distribution of the balance of the Compensation
    Options (entitling the Agents to acquire up to 2.5% of the
    number of Shares and Warrants sold under the Offering) is not
    qualified under this prospectus and such portion of the
    Compensation Options will be issued to the Agents pursuant to
    exemptions from the prospectus and registration requirements of
    applicable securities legislation and will be subject to resale
    restrictions under applicable securities legislation.
In consideration of certain fiscal advisory services rendered by
    the Agents to us pursuant to the Fiscal Advisory Fee Agreement,
    we have agreed to issue to the Agents that number of shares of
    our common stock equal to, depending on the gross proceeds of
    the Offering, between 1.0% and 2.0% of the number of issued and
    outstanding shares of our common stock outstanding on the
    closing of the Offering. The distribution of these shares of our
    common stock to the Agents pursuant to the Fiscal Advisory Fee
    Agreement is not qualified by this prospectus. Such shares will
    be issued pursuant to exemptions from the prospectus and
    registration requirements of applicable securities legislation
    and will be subject to resale restrictions under applicable
    securities legislation. See "Material Contracts".
PRIOR
    SALES
In the past 12 months, shares of our common stock or
    securities convertible or exercisable for shares of our common
    stock have been issued by us as follows:
Number of Shares
Issue Price
Nature of
of Common Stock
Per Share of
Aggregate
Date of Issuance
Securities Issued
Issued or Issuable
Common Stock
Issue Price
May 2009
options
(1)
2,335,940
$
0.15
—
January 2009
shares of common stock
(2)
2,000,000
$
0.15
$
300,000
January 2009
warrants
(2)
1,000,000
$
0.20
—
December 2008
warrants
(3)
120,000
$
0.01
—
December 2008
warrants
(4)
11,583
$
0.15
—
November 2008
options
(5)
142,864
$
0.15
—
November 2008
options
(6)
446,424
$
0.15
—
September 2008
shares of common
    stock
(7)
444,447
$
0.15
$
66,667
August 2008
shares of common
    stock
(8)
2,000,000
$
0.15
$
300,000
July 2008
options
(9)
1,328,000
$
0.20
—
July 2008
shares of common
    stock
(10)
13,364,899
$
0.15
$
2,004,735
July 2008
warrants
(11)
66,667
$
0.01
—
June 2008
warrants
(12)
157,504
$
0.01
—
June 2008
warrants
(13)
24,945
$
0.20
—
June 2008
shares of common
    stock
(14)
1,552,936
$
0.01
$
15,529
Notes:
(1)
Options were granted under our stock option plan to 44 employees
    and are exercisable for ten years from the date of grant,
    subject to vesting over four years from the date of grant.
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(2)
Shares of our common stock, together with a warrant to purchase
    an additional 1,000,000 shares of our common stock, were
    issued to an individual investor and such warrants are
    exercisable for five years from the date of issue.
(3)
Warrants were issued to a consultant in consideration for
    services and are exercisable for five years from the date of
    issuance.
(4)
Warrants were issued to a consultant in consideration for
    services and are exercisable for five years from the date of
    issuance.
(5)
Options were granted under our stock option plan to our external
    director as his annual retainer for serving and are exercisable
    for ten years from the date of grant, subject to vesting over
    12 months from the date of grant.
(6)
Options were issued to one consultant and two employees and are
    exercisable for ten years from the date of grant, subject to
    vesting over four years from the date of grant.
(7)
Shares of our common stock were issued to a consultant for
    services.
(8)
Shares of our common stock were issued to an individual investor.
(9)
Options were issued under our 2007 stock option plan to seven
    employees and are exercisable for ten years from the date of the
    grant subject to vesting over four years from the date of grant.
(10)
Shares of our common stock were issued to 46 individual and
    institutional investors.
(11)
Warrants were issued to a consultant in consideration for
    services and are exercisable for five years from the date of
    issuance.
(12)
Warrants were issued to a consultant in consideration for
    services and are exercisable for five years from the date of
    issuance.
(13)
Warrants were issued to a consultant in consideration for
    services and are exercisable for five years from the date of
    issuance.
(14)
Shares issued to 51 investors pursuant to the exercise of then
    outstanding warrants.
Except for the Shares and Warrants issuable pursuant to the
    Offering (including pursuant to the exercise of the
Over-Allotment
Option and the issuance of shares of our common stock pursuant
    to the Fiscal Advisory Fee Agreement), and the shares of our
    common stock issuable pursuant to the conversion of outstanding
    convertible securities if, as and when converted by the holders
    thereof, as more particularly described in the U.S. Prospectus,
    we do not have a present intention to issue any other securities.
MATERIAL
    CONTRACTS
The only material contracts not in the ordinary course of
    business entered into since the beginning of the last financial
    year ending before the date of the prospectus, or before the
    beginning of such financial year where such contract is still in
    effect, or to be entered into, on or before the closing of the
    Offering, are as follows:
(a)
Warrant Indenture. See "Plan of Distribution".
(b)
Shareholders Agreement dated as of October 11, 2000 by and
    among Vuzix and Shareholders (as defined therein). See
    "Description of Capital Stock — Registration
    Rights" and Exhibit 10.9 in the U.S. Prospectus.
(c)
Technology Purchase and Royalty Agreement dated as of
    December 23, 2005 between Vuzix and New Light
    Industries, Ltd. See "Description of Capital
    Stock —  Registration Rights" and
    Exhibit 10.12 in the U.S. Prospectus.
(d)
Demand Note in the original principal amount of $247,690.92 by
    Vuzix to the order of Paul J. Travers. See Exhibit 10.17 in
    the U.S. Prospectus.
(e)
Loan Agreement dated as of October 2008 by and between the Vuzix
    and Paul J. Travers. See Exhibit 10.18 in the U.S.
    Prospectus.
(f)
Promissory Note dated as of October 2008 by Vuzix to the order
    of Paul J. Travers. See Exhibit 10.19 in the U.S.
    Prospectus.
(g)
Fiscal Advisory Fee Agreement dated as of June 29, 2009 between
    Vuzix and the Agents. See Exhibit 10.21 in the U.S.
    Prospectus.
In connection with the Offering, we will also enter into the
    Agency Agreement between the Company and the Agents referred to
    under "Plan of Distribution".
Copies of these agreements are attached as exhibits to the U.S.
    Prospectus, are available on www.sedar.com and also may be
    examined during normal business hours at the offices of our
    Canadian legal counsel, Wildeboer Dellelce LLP, located at
    Wildeboer Dellelce Place, Suite 800, 365 Bay Street,
    Toronto, Ontario, M5H 2V1, any time during the period of
    distribution of the Units under this prospectus.
CDN-10
Table of Contents
Alternate page for Canadian Prospectus
ELIGIBILITY
    FOR INVESTMENT
In the opinion of Wildeboer Dellelce LLP, our Canadian counsel,
    and McCullough O'Connor Irwin LLP, the Canadian counsel to
    the Agents, provided that the relevant provisions of the Tax Act
    and the regulations thereunder remain unamended at the time that
    the Shares are listed on a designated stock exchange for purpose
    of the Tax Act (which currently includes the
TSX-V),
the
    Shares, if and when listed on a designated stock exchange, and
    the Warrants, if and when the Shares are listed on a designated
    exchange, will be qualified investments under the Tax Act and
    the regulations thereunder for trusts governed by registered
    retirement savings plans, registered retirement income funds,
    deferred profit sharing plans, registered education savings
    plans, registered disability savings plans and tax-free savings
    accounts (each a "Registered Plan"), provided that, in
    the case of the Warrants, each person who is an annuitant, a
    beneficiary, an employer or a subscriber under the Registered
    Plan deals at arm's length (within the meaning of the Tax
    Act) with us. There can be no assurances that the Shares will be
    listed on a designated stock exchange.
An investment in our Shares and Warrants will not generally be a
    "prohibited investment" for a particular trust
    governed by a tax-free savings account provided the holder does
    not have a "significant interest" in us. Generally, a
    holder will not have a significant interest in us unless the
    holder and/or persons not dealing at arm's length with the
    holder, owns directly or indirectly, 10% or more of the issued
    shares of any class of our capital stock or a corporation
    related to us. Specific rules may also deem an individual to own
    shares of a partnership in which he or she is a member or a
    trust of which he or she is a beneficiary.
PURCHASERS'
    STATUTORY RIGHTS
Securities legislation in certain provinces of Canada provides
    purchasers with the right to withdraw from an agreement to
    purchase securities. This right may be exercised within two
    business days after receipt or deemed receipt of a prospectus
    and any amendment. In several of the provinces, the securities
    legislation further provides a purchaser with remedies for
    rescission or, in some jurisdictions, damages if the prospectus
    and any amendment contains a misrepresentation or is not
    delivered to the purchaser, provided that such remedies for
    rescission or damages are exercised by the purchaser within the
    time limit prescribed by the securities legislation of the
    purchaser's province or territory. The purchaser should
    refer to any applicable provisions of the securities legislation
    of the purchaser's province or territory for the
    particulars of these rights or consult with a legal advisor.
UNITED
    STATES PROSPECTUS
Attached is the U.S. Prospectus, which forms part of the
Form S-1
registration statement filed with the United States Securities
    and Exchange Commission in connection with the U.S. offering.
    The U.S. Prospectus is deemed to form a part of this
    prospectus.
CDN-11
Table of Contents
Alternate page for Canadian Prospectus
CERTIFICATE
    OF VUZIX CORPORATION
Dated June 30,
    2009
This prospectus constitutes full, true and plain disclosure of
    all material facts relating to the securities offered by this
    prospectus as required by the securities legislation of each of
    the provinces of Canada other than Québec.
By: (Signed)
Paul J.
    Travers
By: (Signed)
Grant Russell
President and Chief Executive Officer
Chief Financial Officer, Treasurer and Secretary
On behalf of the Board of Directors of Vuzix Corporation
By: (Signed)
William Lee
Director
CDN-C-1
Table of Contents
Alternate page for Canadian Prospectus
CERTIFICATE
    OF THE AGENTS
Dated June 30,
    2009
To the best of our knowledge, information and belief, this
    prospectus constitutes full, true and plain disclosure of all
    material facts relating to the securities offered by this
    prospectus as required by the securities legislation of each of
    the provinces of Canada other than Québec.
CANACCORD CAPITAL CORPORATION
BOLDER INVESTMENT PARTNERS, LTD.
By: (Signed)
David Rentz
By: (Signed)
Paul
    Woodward
CDN-C-2
Table of Contents
PART II
INFORMATION
    NOT REQUIRED IN PROSPECTUS
Item 13.
Other
    Expenses of Issuance and Distribution.
The following table sets forth all costs and expenses, other
    than underwriting discounts and commissions, payable by us in
    connection with the sale of the common stock being registered.
    All amounts shown are estimates except for the SEC registration
    fee, the FINRA filing fee, the Canadian securities regulators
    filing fees and the
TSX-V
filing
    fee.
Amount to
be Paid
SEC registration fee
$
1,699
FINRA filing fee
$
3,734
Canadian securities regulators filing fees
*
TSX-V
filing
    fee
*
Blue sky qualification fees and expenses
*
Printing and engraving expenses
*
Legal fees and expenses
*
Accounting fees and expenses
*
Transfer agents and registrar fees and expenses
*
Miscellaneous expenses
*
Total
$
*
*
To be provided by amendment.
Item 14.
Indemnification
    of Directors and Officers.
We are incorporated under the laws of the State of Delaware.
    Section 145 of the Delaware General Corporation Law
    provides that a Delaware corporation may indemnify any persons
    who are, or are threatened to be made, parties 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 such corporation), by
    reason of the fact that such person was an officer, director,
    employee or agents of such corporation, or is or was serving at
    the request of such person as an officer, director, employee or
    agents of another corporation or enterprise. The indemnity may
    include expenses (including attorneys' fees), judgments,
    fines and amounts paid in settlement actually and reasonably
    incurred by such person in connection with such action, suit or
    proceeding, provided that such person acted in good faith and in
    a manner he or she reasonably believed to be in or not opposed
    to the corporation's best interests and, with respect to
    any criminal action or proceeding, had no reasonable cause to
    believe that his or her conduct was illegal. A Delaware
    corporation may indemnify any persons who are, or are threatened
    to be made, a party to any threatened, pending or completed
    action or suit by or in the right of the corporation by reason
    of the fact that such person was a director, officer, employee
    or agents of such corporation, or is or was serving at the
    request of such corporation as a director, officer, employee or
    agents of another corporation or enterprise. The indemnity may
    include expenses (including attorneys' fees) actually and
    reasonably incurred by such person in connection with the
    defense or settlement of such action or suit, provided such
    person acted in good faith and in a manner he or she reasonably
    believed to be in or not opposed to the corporation's best
    interests except that no indemnification is permitted without
    judicial approval if the officer or director is adjudged to be
    liable to the corporation. Where an officer or director is
    successful on the merits or otherwise in the defense of any
    action referred to above, the corporation must indemnify him or
    her against the expenses which such officer or director has
    actually and reasonably incurred.
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Section 102(b)(7) of the Delaware General Corporation Law
    permits a corporation to provide in its certificate of
    incorporation that a director of the corporation shall not be
    personally liable to the corporation or its stockholders for
    monetary damages for breach of fiduciary duties as a director,
    except for liability for any:
•
transaction from which the director derives an improper personal
    benefit;
•
act or omission not in good faith or that involves intentional
    misconduct or a knowing violation of law;
•
unlawful payment of dividends or redemption of shares; or
•
breach of a director's duty of loyalty to the corporation
    or its stockholders.
Our certificate of incorporation provides that we shall
    indemnify each director and officer of the registrant, his
    heirs, executors and administrators, and may indemnify each
    employee and agents of the registrant, his heirs, executors,
    administrators and all other persons whom the registrant is
    authorized to indemnify under the provisions of the General
    Corporation Law of the State of Delaware, to the greatest extent
    permitted or provided by law (a) against all expenses
    (including attorney's fees), judgments, fines and amounts
    paid in settlement actually and reasonably incurred by him in
    connection with any action, suit or proceeding, whether civil,
    criminal, administrative or investigative, or in connection with
    any appeal therein, or otherwise, and (b) against all
    expenses (including attorney's fees) actually and
    reasonably incurred by him in connection with the defense or
    settlement of any action or suit by or in the right of the
    registrant, or in connection with any appeal therein, or
    otherwise; and no provision of Article 9 of the
    registrant's certificate of incorporation is intended to be
    construed as limiting, prohibiting, denying or abrogating any of
    the general or specific powers or rights conferred by the
    General Corporation Law of the State of Delaware upon the
    registrant to furnish, or upon any court to award, such
    indemnification, or indemnification as otherwise authorized
    pursuant to the General Corporation Law of the State of Delaware
    or any other law now or hereafter in effect.
Our by-laws provide that all directors and officers of the
    registrant shall be entitled to be indemnified by us to the
    fullest extent permitted by the General Corporation Law of the
    State of Delaware. In addition, our by-laws provide that any
    person serving or having served at the request of the registrant
    as a director, trustee, officer, employee or agents of another
    corporation or of a partnership, joint venture, trust or other
    enterprise, including service with respect to an employee
    benefit plan, shall be entitled to be indemnified by us to the
    fullest extent permitted by the General Corporation Law of the
    State of Delaware.
Insofar as indemnification for liabilities arising under the
    Securities Act may be permitted to our directors, officers, and
    controlling persons pursuant to the foregoing provisions, or
    otherwise, we have been advised that in the opinion of the SEC
    such indemnification is against public policy as expressed in
    the Securities Act and is, therefore, unenforceable. In the
    event that a claim for indemnification against such liabilities
    (other than the payment of expenses incurred or paid by a
    director, officer or controlling person in a successful defense
    of any action, suit or proceeding) is asserted by such director,
    officer or controlling person in connection with the securities
    being registered, we will, unless in the opinion of its counsel
    the matter has been settled by controlling precedent, submit to
    the court of appropriate jurisdiction the question whether such
    indemnification by it is against public policy as expressed in
    the Securities Act and will be governed by the final
    adjudication of such issue.
Section 174 of the Delaware General Corporation Law
    provides, among other things, that a director who willfully or
    negligently approves of an unlawful payment of dividends or an
    unlawful stock purchase or redemption may be held liable for
    such actions. A director who was either absent when the unlawful
    actions were approved, or dissented at the time, may avoid
    liability by causing his or her dissent to such actions to be
    entered in the books containing minutes of the meetings of the
    board of directors at the time such action occurred or
    immediately after such absent director receives notice of the
    unlawful acts.
As permitted by the Delaware General Corporation Law, we have
    entered into indemnity agreements with each of our directors and
    executive officers that require us to indemnify such persons
    against any and all expenses (including attorneys' fees),
    witness fees, damages, judgments, fines, settlements and other
    amounts incurred (including expenses of a derivative action) in
    connection with any action, suit or proceeding, whether actual
    or threatened, to which any such person may be made a party by
    reason of the fact that such person is or was a director, an
    officer or an employee of Vuzix or any of its affiliated
    enterprises, provided that such person acted in good faith
II-2
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and in a manner such person reasonably believed to be in or not
    opposed to our best interests and, with respect to any criminal
    proceeding, had no reasonable cause to believe his or her
    conduct was unlawful. The indemnification agreements also set
    forth certain procedures that will apply in the event of a claim
    for indemnification thereunder.
At present, there is no pending litigation or proceeding
    involving any of our directors or executive officers as to which
    indemnification is required or permitted, and we are not aware
    of any threatened litigation or proceeding that may result in a
    claim for indemnification.
We have an insurance policy covering our officers and directors
    with respect to certain liabilities, including liabilities
    arising under the Securities Act or otherwise.
Reference is made to the following documents filed as exhibits
    to this registration statement regarding relevant
    indemnification provisions described above and elsewhere herein:
Item 15.
Recent
    Sales of Unregistered Securities.
The following list sets forth information regarding all
    securities sold or issued by us in the three years preceding the
    date of this registration statement.
(1) In May 2009, we granted options under our 2007 stock
    option plan to purchase an aggregate of 2,335,940 shares of
    our common stock to 44 employees. Each option is
    exercisable at $0.15 per share for ten years from the date of
    grant, subject to vesting over four years from the date of
    grant. The exercise price of these options is subject to upward
    adjustment to the initial public offering price per share of our
    common stock if the closing of this offering occurs within
    90 days of the grant date.
(2) In January 2009, we issued 2,000,000 shares of our
    common stock at a purchase price of $0.15, together with a
    warrant to purchase an additional 1,000,000 shares of
    shares of our common stock at an exercise purchase price of
    $0.20 per share for 5 years from the date of issue, to an
    individual investor for aggregate gross proceeds of $300,000 in
    cash.
(3) In December 2008, we issued warrants to purchase
    120,000 shares of our common stock, exercisable at $0.01
    per share for five years from the date of issuance, to a
    consultant in consideration for services.
(4) In December 2008, we issued warrants to purchase
    11,583 shares of our common stock, exercisable at $0.15 per
    share for five years from the date of issuance, to a consultant
    in consideration for services.
(5) In November 2008, we granted an option under our 2007
    stock option plan to purchase 142,864 shares of our common
    stock to our external director as his annual retainer. The
    option is exercisable at $0.15 per share for ten years from the
    date of issuance and vests over 12 months from the date of
    grant.
(6) In November 2008, we granted options under our 2007
    stock option plan to purchase an aggregate of
    446,424 shares of our common stock to one consultant and
    two employees. Each option is exercisable at $0.15 per share for
    ten years from the date of grant, subject to vesting over four
    years from the date of grant.
(7) In September 2008, we issued 444,447 shares of our
    common stock to a consultant in consideration for services.
(8) In July and August 2008, we issued
    15,364,899 shares of our common stock to 46 individual and
    institutional investors for aggregate gross proceeds of
    $2,304,735 in cash.
(9) In July 2008, we issued warrants to purchase
    66,667 shares of our common stock, exercisable at
    $0.01 per share for five years from the date of issuance,
    to a consultant in consideration for services.
(10) In July 2008, we issued 482,640 shares of our
    common stock to a consultant in consideration for services.
(11) In July 2008, we granted options under our 2007 stock
    option plan to purchase an aggregate of 1,328,000 shares of
    our common stock to seven employees. Each option is exercisable
    at $0.20 per share for ten years from the date of grant, subject
    to vesting over four years from the date of grant.
(12) In June 2008, we issued 1,552,936 shares of our
    common stock to 51 institutional and individual investors upon
    the exercise of warrants for aggregate gross proceeds of $15,529
    in cash.
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(13) In June 2008, we issued warrants to purchase
    157,504 shares of our common stock, exercisable at
    $0.01 per share for five years from the date of issuance,
    to a consultant in consideration for services.
(14) In June 2008, we issued warrants to purchase
    24,945 shares of our common stock, exercisable at
    $0.20 per share for five years from the date of issuance,
    to a consultant in consideration for services.
(15) In January 2008, we issued 2,450,888 shares of
    our common stock upon the exercise of options granted under our
    2007 stock option plan for aggregate gross proceeds of $24,509
    in cash.
(16) In December 2007, we issued warrants to purchase
    45,000 shares of our common stock exercisable at $0.01 per
    share and warrants to acquire 37,720 shares of our common
    stock exercisable at $0.23336 per share to two consultants in
    consideration for services.
(17) In November 2007, we granted options under our 2007
    stock option plan to purchase an aggregate of
    140,000 shares of our common stock to an employee. Each
    option is exercisable at $0.20 per share for ten years from the
    date of grant, subject to vesting over four years from the date
    of grant.
(18) In November 2007, we granted an option under our 2007
    stock option plan to purchase 142,864 shares of our common
    stock to our non-employee director. The option is exercisable at
    $0.20 per share for ten years from the date of issuance and
    vests over 12 months from the date of grant.
(19) In November 2007, we issued 134,280 shares of our
    common stock for aggregate gross proceeds of $1,343 in cash upon
    the exercise of the warrants issued in the transactions
    described in paragraph 37 below.
(20) In November 2007, we issued 500,000 shares of our
    common stock upon the conversion of outstanding indebtedness at
    the rate of $0.20 per share.
(21) In October 2007, we issued warrants to acquire
    65,000 shares of our common stock, exercisable at
    $0.20 per share for two years from the date of issuance, to
    a consultant in consideration for services.
(22) In September 2007, we granted options under our 2007
    stock option plan to purchase an aggregate of
    644,000 shares of our common stock to six employees. Each
    option is exercisable at $0.20 per share for ten years from the
    date of grant, subject to vesting over four years from the date
    of grant.
(23) In July 2007, we issued 42,856 shares of our
    common stock to an individual investor for $429 in cash upon the
    exercise of warrants issued in the transaction described in
    paragraph 38 below.
(24) In June 2007, we issued warrants to acquire
    38,568 shares of our common stock, exercisable at
    $0.0875 per share for five years from the date of issuance,
    to a consultant in consideration for services.
(25) In June 2007, we issued 20,891,600 shares of our
    common stock to 160 individual and institutional investors for
    aggregate gross proceeds of $4,178,320 in cash.
(26) In June 2007, in consideration of their services as
    placement agents in the private placement described in the
    immediately preceding paragraph, we issued to Canaccord Capital
    Corporation 2,233,872 shares of our common stock and to
    Canaccord Capital Corporation, IQ Ventures, Inc. and Lighthouse
    Financial Group, LLC warrants to purchase up to an aggregate of
    2,456,656 shares of our common stock, exercisable at $1.60
    per share for two years from the date of issuance. The exercise
    price of the warrants has been reduced to $0.20 per share as a
    result of anti-dilution adjustments in accordance with the terms
    thereof.
(27) In June 2007, we issued warrants to acquire 17,144 and
    48,000 shares of our common stock, exercisable at $0.00875
    per share for five years from the date of issuance, to two
    consultants in consideration for services.
(28) In June 2007, we issued warrants to acquire
    168,320 shares of our common stock, exercisable at $0.20
    per share for five years from the date of issuance, to a
    consultant in consideration for services.
(29) In May 2007, we issued 402,484 shares of our
    common stock upon the exercise of options granted under our 2007
    stock option plan for aggregate gross proceeds of $3,539 in cash.
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(30) In April 2007, we granted options under our 1997 stock
    option plan to purchase an aggregate of 274,286 shares of
    our common stock to two employees. Each option is exercisable at
    $0.2334 per share for ten years from the date of grant, subject
    to vesting over four years from the date of grant.
(31) In April 2007, we granted options under our 1997 stock
    option plan to purchase 571,432 shares of our common stock
    to a consultant. The option is exercisable at $0.2334 per share
    for five years from the date of grant, subject to vesting over
    two years from the date of grant.
(32) In December 2006, we granted options under our 1997
    stock option plan to purchase an aggregate of
    390,286 shares of our common stock to 12 employees.
    Each option is exercisable at $0.2334 per share for ten years
    from the date of grant, subject to vesting over four years from
    the date of grant.
(33) In November 2006, we granted options under our 1997
    stock option plan to purchase an aggregate of
    571,429 shares of our common stock to three employees. Each
    option is exercisable at $0.2334 per share for ten years from
    the date of grant, subject to vesting over four years from the
    date of grant.
(34) In November 2006, we granted an option under our 1997
    stock option plan to purchase 142,864 shares of our common
    stock to our external director as his annual retainer, The
    option is exercisable at $0.2334 per share for ten years from
    the date of issuance and vests over 12 months from the date
    of grant.
(35) In September 2006, we issued 22,857 shares of our
    common stock upon the exercise of options granted under our 1997
    stock option plan for aggregate gross proceeds of $229 in cash.
(36) In September 2006, in consideration of a loan of
    $500,000, we issued to the lender a warrant exercisable upon
    conversion of the promissory note issued in evidence of the loan
    to purchase up to that number of shares of our common stock
    equal to the principal amount of and accrued interest on the
    promissory note then converted divided by 0.5334, exercisable at
    $0.35 per share for three years from the date of the issue of
    the promissory note. As of the date of this prospectus, the
    promissory note has not been converted. Interest on the
    promissory note accrued at an initial annual rate of 10% but
    increased to 18% as of February 1, 2009.
(37) In September 2006, we issued 10,000 shares of our
    Series C Preferred Stock and a warrant to purchase
    91,432 shares of our common stock, exercisable at $0.00875
    per share for approximately three years from the date of
    issuance, to one individual investor for aggregate gross
    proceeds of $100,000 in cash.
(38) In September 2006, in consideration of loans in the
    aggregate amount of $200,000, we issued to the lenders warrants
    to purchase up to 85,712 shares of our common stock,
    exercisable at $0.00875 per share for five years from the date
    of issuance.
(39) In August 2006, we granted an employee an option under
    our 1997 stock option plan to purchase 142,857 shares of
    our common stock, exercisable at $0.2275 per share for ten years
    from the date of grant, subject to vesting over four years from
    the date of grant.
The offers, sales and issuances of the securities described in
    paragraphs 1, 5, 6, 17, 18, 22 and 30 through 34 above were
    deemed to be exempt from registration under the Securities Act
    in reliance on Rule 701 because the transactions were under
    compensatory benefit plans and contracts relating to
    compensation as provided under Rule 701. The recipients of
    such securities were our employees, directors or bona fide
    consultants and received the securities under our stock option
    plan. Appropriate legends were affixed to the securities issued
    in these transactions. Each of the recipients of securities in
    these transactions had adequate access, through employment,
    business or other relationships, to information about us.
The offers, sales and issuances of the securities described all
    the other paragraphs above were deemed to be exempt from
    registration under the Securities Act in reliance on
    Rule 506 of Regulation D because the issuance of
    securities to the accredited investors did not involve a public
    offering. The recipients of securities in each of these
    transactions acquired the securities for investment only and not
    with a view to or for sale in connection with any distribution
    thereof and appropriate legends were affixed to the securities
    issued in these transactions. Each of the recipients of
    securities in these transactions was an accredited investor
    under Rule 501 of Regulation D.
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Item 16.
Exhibits
    and Financial Statement Schedules.
(a)
Exhibits.
A list of exhibits filed with this registration statement on
Form S-1
is set forth in the Exhibit Index and is incorporated in
    this Item 16(a) by reference.
(b)
Financial
    Statement Schedules.
No financial statement schedules are provided because the
    information called for is not required or is shown either in the
    financial statements or the notes thereto.
Item 17.
Undertakings.
The undersigned registrant hereby undertakes to provide to the
    agents at the closing specified in the underwriting agreement
    certificates in such denominations and registered in such names
    as required by the agents to permit prompt delivery to each
    purchaser.
Insofar as indemnification for liabilities arising under the
    Securities Act 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 SEC such indemnification is against public
    policy as expressed in the Securities 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 in the
    opinion of its counsel the matter has been settled by
    controlling precedent, submit to a court of appropriate
    jurisdiction the question whether such indemnification by it is
    against public policy as expressed in the Securities Act 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, 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, 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, as
    amended, the registrant has duly caused this Registration
    Statement on
Form S-1
to be signed on its behalf by the undersigned, thereunto duly
    authorized, in the City of Rochester, State of New York, on the
    30th day of June, 2009.
VUZIX CORPORATION
By:
/s/  Paul
    J. Travers
Paul J. Travers
President and Chief Executive Officer
POWER OF
    ATTORNEY
We, the undersigned directors and officers of Vuzix Corporation,
    do hereby constitute and appoint Paul J. Travers and Grant
    Russell, or either of them, our true and lawful attorneys and
    agents, to do any and all acts and things in our name and on our
    behalf in our capacities as directors and officers and to
    execute any and all instruments for us and in our names in the
    capacities indicated below, which said attorneys and agents, or
    either of them, may deem necessary or advisable to enable said
    registrant to comply with the Securities Act of 1933 and any
    rules, regulations and requirements of the Securities and
    Exchange Commission, in connection with this registration
    statement, including specifically, but without limitation, power
    and authority to sign for us or any of us in our names in the
    capacities indicated below, any and all amendments (including
    post-effective amendments and any related registration statement
    pursuant to Rule 462(b) under the Securities Act of
    1933) hereto and we do hereby ratify and confirm all that
    said attorneys and agents, or any of them, shall do or cause to
    be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as
    amended, this Registration Statement on
Form S-1
has been signed by the following persons in the capacities and
    on the dates indicated.
Signature
Title
Date
/s/  Paul
    J. Travers
Paul
    J. Travers
President, Chief Executive Officer
and Director
(Principal Executive Officer)
June 30, 2009
/s/  Grant
    Russell
Grant
    Russell
Chief Financial Officer, Secretary
and Treasurer
(Principal Financial and Accounting Officer)
June 30, 2009
/s/  William
    Lee
William
    Lee
Director
June 30, 2009
II-7
Table of Contents
Index to
    Exhibits
1
.1*
Form of Agency Agreement
3
.1
Certificate of Incorporation currently in effect
3
.2*
Amended and Restated Certificate of Incorporation to be
    effective immediately following the closing of the offering
3
.3
Bylaws currently in effect
3
.4*
Amended and Restated Bylaws to be effective immediately
    following the closing of the offering
4
.1*
Specimen certificate evidencing shares of common stock
4
.2*
Specimen common stock purchase warrant
4
.3*
Form of Warrant Indenture between the registrant and
    Computershare Trust Company of Canada
Certain instruments defining the rights of the holders of
    long-term debt of the registrant, none of which authorize a
    total amount of indebtedness in excess of 10% of the total
    assets of the registrant and its subsidiary on a consolidated
    basis, have not been filed as exhibits. The registrant hereby
    agrees to furnish a copy of any of these agreements to the
    Commission upon request.
5
.1*
Opinion of Boylan, Brown, Code, Vigdor & Wilson, LLP
10
.1+
2007 Amended and Restated Stock Option Plan
10
.2+
2009 Stock Plan
10
.3+*
Form of Award Agreement under 2009 Stock Plan
10
.4+
2009 Non-Employee Directors' Stock Option Plan
10
.5+*
Form of Option Grant Agreement under 2009 Non-Employee
    Directors' Stock Option Plan
10
.6+
Form of Indemnification Agreement by and between the registrant
    and each director and executive officer
10
.7+
Employment Agreement dated as of August 1, 2007 by and
    between the registrant and Paul J. Travers
10
.8+
Employment Agreement dated as of August 1, 2007 by and
    between the registrant and Grant Russell
10
.9
Shareholders Agreement dated as of October 11, 2000 by and
    among the registrant and Shareholders (as defined therein)
10
.10
Registration Rights Agreement dated as of October 11, 2000
    by and among the registrant and the Investors (as defined
    therein)
10
.11
Registration Rights Agreement dated as of June 2005 by and among
    the registrant and the Investors (as defined therein)
10
.12*
Technology Purchase and Royalty Agreement dated as of
    December 23, 2005 between the registrant and New Light
    Industries, Ltd.
10
.13
Warrant to purchase common stock dated as of December 23,
    2005 issued by the registrant to New Light Industries, Ltd.
10
.14
Rights Agreement dated as of December 23, 2005 by and
    between the registrant and New Light Industries, Ltd.
10
.15
Agency Agreement dated as of June 29, 2007 by and between
    the registrant and Canaccord Capital Corporation
10
.16
Form of warrant to purchase common stock issued by the
    registrant pursuant to the Agency Agreement dated as of
    June 29, 2007 by and between the registrant and Canaccord
    Capital Corporation
10
.17
Demand Note in the original principal amount of $247,690.92 by
    the registrant to the order of Paul J. Travers
10
.18
Loan Agreement dated as of October 2008 by and between the
    registrant and Paul J. Travers
10
.19*
Promissory Note dated as of October 2008 by the registrant to
    the order of Paul J. Travers
10
.20
Fiscal Advisory Fee Agreement dated as of June 29, 2009 by
    and between the registrant and Canaccord Capital Corporation and
    Bolder Investment Partners, Ltd.
23
.1
Consent of Rotenberg & Co. LLP, independent registered
    public accounting firm
23
.2
Consent of Davie Kaplan, CPA , P.C., independent registered
    public accounting firm
23
.3*
Consent of Boylan, Brown, Code, Vigdor & Wilson, LLP
    (included in Exhibit 5.1)
24
.1
Power of Attorney (included on signature page)
*
To be filed by amendment
+
Management contract or compensation plan or arrangement