UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the Fiscal Year Ended December 31, ~~2012~~2013

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From ______________ to________________

Commission file number 000-21864

Vu1 Corporation

(Exact name of registrant as specified in its charter)

California	84-0672714
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1 Liberty Plaza, 23rd Floor
1001 Camelia Street
New York, New York	10006
Berkeley, California	94710
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code:	(855) 881-2852

Registrant’s telephone number, including area code: (855) 881-2852

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, no par value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yeso No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yeso No x

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

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 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 x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Nox

The aggregate market value of the issuer’s stock held by non-affiliates on June 30, ~~2012~~2013, the last business day of the registrant’s most recently completed second fiscal quarter, was $148,~~335~~744,~~373~~853, based on the average of the bid and ask prices of such stock on that date of $31.0829 per share, as reported by the OTC Bulletin Board.

On March 20, ~~2012~~2014, there were 810,~~501~~701,~~293~~097 shares of registrant’s common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

Vu1 Corporation

~~2011~~2013 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

		Page No.
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	8
Item 1B.	Unresolved Staff Comments	15
Item 2.	Properties	15
Item 3.	Legal Proceedings	15
Item 4.	Mine Safety Disclosures	15
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	16
Item 6.	Selected Financial Data	1817
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	2322
Item 8.	Financial Statements and Supplementary Data	2322
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	2322
Item 9A.	Controls and Procedures	2322
Item 9B.	Other Information	2423
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	2524
Item 11.	Executive Compensation	3129
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	3635
Item 13.	Certain Relationships and Related Transactions, and Director Independence	3837
Item 14.	Principal Accountant Fees and Services	3837
PART IV
Item 15.	Exhibits and Financial Statement Schedules	4038
Signatures		4341

EXPLANATORY NOTE

Unless otherwise indicated or the context otherwise requires, all references in this Annual Report on Form 10-K to “we,” “us,” “our” and the “Company” are to Vu1 Corporation, Sendio, s.r.o., our former Czech subsidiary, and our inactive subsidiary Telisar Corporation.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We are including the following cautionary statement in this Annual Report to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements. All statements other than statements of historical fact, including statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions, future results of operations or financial position, made in this Annual Report are forward looking. In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” “will,” “target,” variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward-looking.

The forward-looking statements contained herein involve risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. Our expectations, beliefs and projections are expressed in good faith and are believed by management to have a reasonable basis, including without limitation, management’s examination of historical operating trends, data contained in our records and other data available from third parties; however, management’s expectations, beliefs and projections may not be achieved or accomplished. In addition to other factors and matters discussed elsewhere herein, the following are important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements:

·	our lack of working capital and lack of revenues;

·	the availability of capital to us, in the amount and time needed, to fund our development programs and operations, and the terms and dilutive effect of any such financings;

·	our ability to be successful in our product development and testing efforts;

·	our ability to obtain commercial development for our products;

·	our ability to obtain manufacturing capability for our products in a cost-effective manner and at the times and in the volumes required, while maintaining quality assurance;

·	market demand for and acceptance of our products and planned products, and other factors affecting market conditions;

·	technological advances and competitive pressure by our competitors;

·	governmental regulations imposed on us in the United States and European Union; and

·	the loss of any of our key employees or consultants.

For a discussion of these and other factors that may affect our business, results and prospects, see “Item 1. Business” and “Item 1A. Risk Factors.” Readers are urged to carefully review and consider the various disclosures made by us in this Annual Report and in our other reports filed with the Securities and Exchange Commission, and those described from time to time in our press releases and other communications, which attempt to advise interested parties of the risks and factors that may affect our business, prospects and results of operations. Except as required by U.S. federal securities laws, we do not undertake any obligation to update or revise any forward-looking statements to reflect any future events or circumstances.

PART I

ITEM 1. BUSINESS

We design, develop and market mercury-free lighting products using our proprietary Electron Stimulated Luminescence™, or ESL, technology. Our ESL lights use a form of cathode-ray tube technology in which accelerated electrons stimulate phosphor to create light, making the surface of our lights glow in a highly energy-efficient manner and with a warm white natural light. In December 2010, we released our first product, the R30 reflector light for recessed fixtures (a direct replacement for the 65-watt incandescent flood light), which we believe will capture a growing share of the general illumination market in ~~2013~~2014 and over the next several years. We believe our current and planned ESL lighting products offer advantages over competing technologies including increased energy efficiency, longer product lifetime, environmentally safer and toxin-free disposal, superior light quality and lower cost of usage. We also believe that our ESL lights have the potential to replace traditional incandescent light bulbs, compact fluorescent light bulbs (CFLs) and solid-state light emitting diodes (LEDs) in the future because of these competitive advantages. Our technology, intellectual property position and strategic manufacturing ~~relationship~~relationships should enable us to share in the revenues from the worldwide general lighting products market aswhen our current and planned ESL lights enter mainstream consumer, commercial and industrial markets.

Our primary growth strategy is to accelerate the introduction of our lighting products into the commercial and residential general illumination market with the goal of obtaining widespread marketplace adoption over the next two years. In support of this objective, we are pursuing a multi-channel sales, marketing and distribution strategy, which includes efforts to establish business relationships with “big box” retailers, electrical and lighting distributors and municipal utilities.

In addition to our R30 reflector light, which received certification from Underwriters Laboratories Inc. (UL®) in October 2010, we are currently developing our version of the standard Edisonian A19 screw-in light (and its European equivalent, the A60), the most common general purpose electric light in the world~~, for anticipated release during the second quarter of 2013~~. In June 2011, we submitted our A19 light to UL for certification and, in August 2011, received that certification. We are also ~~developing~~planning to develop an R40 flood light for the United States commercial market and a smaller R63 light for the European market to be used in currently-installed recessed lighting fixtures. According to Strategies Unlimited, an independent research firm, the worldwide lighting market accounts for approximately $90 billion in annual sales.

We believe a significant contributing factor to our prospects are government regulations mandating the use of energy-efficient lighting, including the elimination of the production of traditional incandescent light bulbs in Europe by 2012 and in the United States byin 2014, and regulations restricting the use of hazardous substances such as the mercury contained in CFLs. We believe these developments disrupt the well-entrenched lighting industry of past decades and, given the energy conservation and eco-friendly characteristics of our ESL lighting products, create significant opportunities for us to introduce our products into the market in place of incandescent bulbs, as well as CFLs and LEDs.

In ~~October 2011~~February, 2014 we established a ~~key~~research ~~strategic~~and ~~business~~development ~~relationship~~facility ~~with~~in ~~Huayi Lighting Company Ltd. (“Huayi Lighting”)~~Berkeley, anCalifornia ~~experienced lighting products manufacturer. Under a manufacturing agreement, Huayi Lighting has agreed, under our direction,~~ to ~~produce~~continue ~~substantially all of~~ our ~~ESL~~manufacturing ~~lighting products for resale to our customers over the next five years. Through this relationship, Huayi Lighting is responsible for sourcing, fabricating~~ and ~~assembling the required electronic components of our lights, sourcing the glass components from its suppliers and using its processes to assemble and package finished products. Through our~~ development efforts~~, we have filed nine U~~.S. The ~~and~~facility ~~related~~also ~~foreign~~serves ~~patent~~as ~~applications, of which four patents have been granted covering important features of~~ our ~~current~~corporate ~~and planned lighting technology and products, and have accumulated over the past eight years a substantial amount of technical know-how relating to our ESL technology~~headquarters.

~~During~~In ~~2012~~October 2011, we ~~focused~~established ona ~~initiatives~~key tostrategic ~~transition~~business ~~our~~relationship ~~manufacturing~~with ~~operations~~Huayi toLighting Company Ltd. (“Huayi Lighting”), ~~from~~an ~~our~~experienced ~~former~~lighting ~~facility~~products inmanufacturer. Under ~~the~~a ~~Czech~~manufacturing ~~Republic~~agreement, ~~which~~Huayi inLighting ~~the~~has ~~past~~agreed, ~~has~~under ~~primarily~~our ~~provided~~direction, usto ~~with~~produce ~~product~~substantially ~~testing,~~all ~~engineering~~of ~~development~~our ~~and~~ESL ~~pilot~~lighting ~~production~~products offor resale to our ~~initial~~customers ~~products~~over the next five years. ~~These~~Through ~~initiatives~~this ~~also~~relationship, ~~included~~Huayi ~~continued~~Lighting ~~efforts~~is toresponsible ~~work~~for ~~with~~sourcing, ~~Huayi~~fabricating ~~Lighting~~and toassembling ~~refine~~the required electronic components of our lights, sourcing the ~~manufacturing~~glass components from its suppliers and using its processes to assemble and ~~developing~~package finished products. We have introduced our own manufacturing and quality control ~~testing~~processes, ~~necessary~~as ~~for~~well ~~quantity~~as ~~manufacturing~~provided assistance regarding the sourcing of components and subassemblies during the development of the lines. ~~Our~~ ~~progress~~Through ~~has~~our ~~been~~development ~~limited~~efforts, ~~primarily~~we ~~due~~have tofiled ~~lack~~nine U.S. and related foreign patent applications, of ~~adequate~~which ~~funding~~four ~~necessary~~patents tohave ~~execute~~been granted covering important features of our ~~business~~current ~~plan. These~~and ~~initiatives~~planned ~~are~~lighting ~~ongoing~~technology and products, asand have accumulated over the past nine years a ~~result,~~substantial weamount ~~had~~of notechnical ~~revenues~~know-how inrelating ~~2012~~to our ESL technology.

During 2013, we focused on initiatives to continue the development of our manufacturing operations with Huayi Lighting. These initiatives also included continued efforts to work with Huayi Lighting to refine the manufacturing processes, raw materials sourcing and developing quality control testing necessary for quantity manufacturing. Our progress has been limited, primarily due to lack of adequate funding necessary to execute our business plan. These initiatives are ongoing and, as a result, we had no revenues in 2013 and 2012.

OnAs ~~February 13, 2012, Sendio, sro, (“Sendio”) our former subsidiary, filed a petition~~ of ~~insolvency with the Regional Court in Olomouc, Czech Republic. In~~ March ~~2012~~20, ~~the court determined that Sendio was insolvent~~2014, ~~and~~we ~~control~~operate ofthrough the ~~legal~~services ~~entity passed to a court appointed trustee. The trustee is in the process~~ of ~~overseeing~~consultants ~~the orderly sale of the assets and use the proceeds~~ to ~~satisfy~~us, ~~the~~including ~~liabilities~~our ofChief ~~Sendio. Our~~Executive ~~lease~~Officer ~~obligation~~ and ~~the~~Chief ~~obligation~~Financial toOfficer ~~purchase~~as ~~the~~well ~~Sendio~~as ~~facility have been terminated~~sales, asmarketing ~~discussed~~and inengineering ~~Note 6 to the Notes to Consolidated Financial Statements~~consultants.

As of March 20, 2013, we operate through the services of consultants to us, including our Chief Executive Officer and Chief Financial Officer as well as sales, marketing and engineering consultants.

Corporate Information

We were incorporated under the laws of the State of California in August 1996 under the name of Telegen Corporation. In late 2004, we began research and product development on our lighting technology and, in May 2008, changed our name to Vu1 Corporation to better reflect this business focus. Our principal executive offices are located at 11001 ~~Liberty~~Camelia ~~Plaza,~~Street ~~23rd Floor New York~~Berkeley, ~~New~~California ~~York~~94710 ~~10006~~ and our telephone number is (855) 881-2852. Our Internet website address is http://www.vu1.com. The information on our website is not incorporated by reference into this Annual Report.

Overview of the Lighting Market

Traditional incandescent light bulbs are inefficient because they convert only about 5% of the energy they consume into visible light, with the rest emerging as heat. CFLs use excited gases, or plasmas, to achieve a higher energy conversion efficiency of about 20%. However, the color rendering index, or CRI, of most fluorescent bulbs – in other words, how good their color is compared to an ideal light source – is inferior to that of an incandescent bulb. CFLs also pose environmental concerns because they have historically contained mercury. By avoiding the heat and plasma-producing processes of incandescent bulbs and CFLs, LEDs can have substantially higher energy conversion efficiencies. Current LEDs are very small in size (about one square millimeter) and are extremely bright. Having been developed in the 1980s, they are already employed in various specialty lighting products, such as traffic lights, billboards, replacements for neon lighting and as border or accent lighting. However, the high operating temperatures and intense brightness of LEDs may make them less desirable for general illumination and diffuse lighting applications.

The key design features of our ESL lighting products, on the other hand, are that they are energy efficient, fully dimmable, illuminate immediately when switched on and have a color quality or CRI that is warm and similar to incandescent light. In addition, our lights do not contain mercury, a feature which will ease disposal. If our efforts are successful, we believe that our lighting products could begin to be used for applications currently addressed by incandescent bulbs, CFLs and LEDs.

We believe a significant contributing factor to our prospects are government regulations mandating the use of energy-efficient lighting, including the elimination of the production of traditional incandescent light bulbs in Europe by 2012 and in the United States by 2014, and regulations restricting the use of hazardous substances such as the mercury contained in CFLs. We believe these developments disrupt the well-entrenched lighting industry of past decades and, given the energy conservation and eco-friendly characteristics of our ESL lighting products, create significant opportunities for us to introduce our products into the market in place of incandescent bulbs, as well as CFLs and LEDs. Unlike LEDs, our lights also work with existing lighting fixtures without modification.

Our Competitive Advantages

We believe our position in the lighting market is the direct result of our technological innovation. We have built an intellectual property portfolio around our ESL technology and are working with our strategic product manufacturer to prepare for large scale commercial production and to launch our lighting products into the marketplace. Our key competitive advantages include:

Lighting Qualities. We believe our current and planned ESL lighting products offer potential advantages over competing lighting technologies including increased energy efficiency, longer product lifetime, environmentally safer and toxin-free disposal, superior light quality and lower usage cost as a percentage of the lights’ extended lifetime.

Proprietary Technology. Through our internal development efforts in the Czech Republic, we have filed nine U.S. and related foreign patent applications, of which four patents have been granted covering important features of our current and planned lighting technology and products, and have accumulated over the past six years a substantial amount of technical know-how relating to our ESL technology.2

~~Strategic Manufacturing Relationship.~~Proprietary WeTechnology. Through ~~have~~our ~~established~~internal adevelopment ~~key strategic relationship with Huayi Lighting Company Ltd.~~efforts, anwe ~~experienced~~have ~~lighting~~filed ~~products~~nine ~~manufacturer~~U. ~~Under~~S. aand ~~manufacturing~~related ~~agreement~~foreign ~~executed~~patent ~~in 2011~~applications, ~~Huayi~~of ~~Lighting~~which ~~has~~four ~~agreed,~~patents ~~under~~have ~~our~~been ~~direction,~~granted tocovering ~~produce~~important ~~substantially~~features ~~all~~ of our ~~ESL~~current and planned lighting ~~products~~technology ~~for~~and ~~resale~~products, toand ~~our~~have ~~customers~~accumulated over the ~~next~~past ~~five~~six years~~. We~~ ~~believe that this manufacturing agreement will provide us with~~ a ~~consistent~~substantial ~~and~~amount ~~high~~of ~~caliber~~technical ~~source~~know-how ofrelating ~~supply~~ to ~~meet the current and future needs of~~ our ~~customers~~ESL technology.

~~Experienced~~Strategic ~~Management~~Manufacturing Relationship. ~~Our~~ We ~~executive~~have ~~officers~~established ~~and~~a ~~directors~~key ~~have~~strategic ~~significant~~relationship ~~experience~~with inHuayi ~~developing~~Lighting ~~and~~Company ~~executing~~Ltd., aan ~~“go-to-market”~~experienced ~~business~~lighting ~~model~~products inmanufacturer. Under a ~~competitive,~~manufacturing ~~high~~agreement ~~growth~~executed ~~industry. In~~in ~~addition~~2011, ~~our~~Huayi ~~management~~Lighting ~~team~~ has ~~assembled~~agreed, ~~highly-skilled~~under ~~technical~~our ~~personnel~~direction, into ~~Europe~~produce ~~and~~substantially ~~the~~all ~~United~~of ~~States~~our toESL ~~conduct~~lighting ~~ongoing~~products ~~research~~for ~~and~~resale ~~product~~to ~~development~~our ofcustomers ~~new~~over ~~lighting~~the ~~products and~~ next~~-generation~~ ~~technologies~~five years.

Experienced Management. Our executive officers and directors have significant experience in developing and executing a “go-to-market” business model in a competitive, high growth industry. In addition, our management team has assembled highly-skilled technical personnel in the United States to conduct ongoing research and product development of new lighting products and next-generation technologies.

Our Growth Strategy

In addition to our R30 reflector light, which received UL certification in October 2010, we are currently developing our version of the standard Edisonian A19 screw-in light (and its European equivalent, the A60), the most common general purpose electric light in the world. In June 2011, our A19 light was submitted to UL for safety certification and, in August 2011, received that certification. We are also developing an R40 flood light for the United States commercial market and a smaller R63 light for the European market to be used in currently-installed recessed lighting fixtures. According to Strategies Unlimited, an independent research firm, the worldwide lighting market accounts for approximately $90 billion in annual sales.

Our Lighting Technology

Our light uses a form of cathode-ray tube. It has an electron source and a power supply that supplies power to the electron source, as well as high voltage to accelerate the electrons toward the anode, where the electrons stimulate light emission from phosphors.

Electron Source. Our light generates a broad flood of high-energy electrons for evenly exciting the anode. The lights use a hot (thermionic) cathode having a flat disc emissive surface surrounded by a cold shield ring. A positively-biased extraction grid close to the cathode surface provides a high field to extract electrons from the cathode. A diffusion grid above the extraction grid provides a low-field zone allowing the electrons to be distributed evenly across the anode.

Power Supply. The power supply transforms power received through a connector from a fixture into three voltages. One voltage powers a heating filament that heats the cathode to a desired temperature to enhance electron emission. A second voltage biases both the extraction and diffusion grids, providing the high field that pulls electrons from the cathode and a low field that spreads the electrons. The third voltage is the several thousand volts provided through a snubber and a conductive coating inside the glass light structure to the anode; this voltage accelerates the electrons so the electrons can stimulate phosphors into emitting light. The power supply is able to respond to dimmers by reducing the anode voltage, thereby reducing phosphor stimulation and light output.

Anode. The anode is a thin conductive layer of aluminum, with a phosphor layer. Accelerated electrons stimulate light emission from the phosphors. Our white lights have a mixture of three phosphors, two of which (blue and green) are zinc-based, and a third (red) is a europium-doped phosphor. Virtually any color can be produced by choosing an appropriate mix of one or more known phosphors.

Our Lighting Products

The key design features of our current and planned lighting products are that they are energy efficient, fully dimmable, illuminate immediately when switched on and have a color quality that is warm and similar to incandescent light. Our lighting products do not contain mercury, a feature which will ease disposal.

We are continuing to refine the design of our planned products to maximize their efficiency, and we expect there will be adjustments to our current designs. If these efforts are successful, we believe that our lighting products could begin to be used for applications currently addressed by incandescent bulbs, CFLs and LEDs.

A list and description of each of our current and planned lighting products is set forth below:

Model Shape/Size	General Description

R30	U.S. reflector light for recessed lighting fixtures. This is the most popular size reflector.

A19	U.S. standard Edisonian screw-in light. This is the most common general purpose electric light in the world.

R40	U.S. reflector flood light for recessed lighting fixtures. This is the second largest selling reflector.

R95	European version of R30 reflector (220 volt).

A60	European standard version of A19 Edisonian screw-in light (220 volt).

R125	European version of R40 reflector flood light (220 volt).

R20/R63	U.S. and European reflector.

PAR38	U.S. and European spot reflector primarily for outdoor use.

In the future, we expect the retail price of our R30 reflector light and our other lighting products to be established by “big box” retailers and electrical and lighting distributors.

Product Development

~~During~~In ~~late~~February, ~~2009~~2014, we ~~transitioned~~established our ~~U.S.~~product, manufacturing and quality control development efforts toin the ~~Czech~~United ~~Republic~~States and focused on the application of ESL technology on the requirements of our initial product, an R30 size light. The R30 size light is used primarily in lighting fixtures that are recessed in the ceiling of commercial and residential buildings and are commonly referred to as “recessed can fixtures.” We continued our development work on the technology to refine the prototype with the miniaturization of the electronics and improvements to the efficiency of the product and the design and implementation of the processes required for manufacturing the light. ~~During~~We ~~the~~also ~~second~~focused ~~quarter~~on the development of ~~2010,~~quality wecontrol ~~submitted~~over the ~~R30~~sourcing ~~light~~and ~~for~~manufacturing ~~safety~~processes ~~certification~~of Huayi Lighting. We continue to ULwork ~~and,~~with inHuayi ~~October~~to ~~2010,~~refine wethe ~~received~~production ~~certification. We~~processes ~~are~~and ~~continuing~~develop tothe ~~refine~~supply chain for the ~~size~~components ofused in the ~~light,~~manufacturing ~~further~~of ~~miniaturize~~our bulbs. We have also hired consultants in the ~~electronics~~United States and ~~improve~~in China to assist Huayi with the manufacturing processes toand ~~enable~~quality uscontrol toof ~~produce~~ the ~~product~~manufacturing. This ateffort ~~commercially~~will ~~viable~~continue ~~levels~~in 2014.

During the second quarter of 2010, we submitted the R30 light for safety certification to UL and, in October 2010, we received certification. We are continuing to refine the size of the light, further miniaturize the electronics and improve the manufacturing processes to enable us to produce the product at commercially viable levels.

During the fourth quarter of 2010, we began developing our version of the standard Edisonian A19 screw-in light (and its European equivalent, the A60), the most common general purpose electric light in the world. This size light is used in ordinary household lamps and non-recessed ceiling fixtures. In December 2010, we successfully developed a working prototype of this light. We are continuing to refine the prototype with the miniaturization of the electronics and improvements to the efficiency of the product. In June 2011, we submitted our A19 light to UL for safety certification and, in August 2011, received that certification. We are also developing an R40 flood light for the United States commercial market and a smaller R63 light for the European market to be used in currently-installed recessed lighting fixtures.

~~During~~Our ~~2012,~~emphasis weon ~~completed~~ the ~~transition~~development of our planned products, the additional manufacturing ~~operations~~processes torequired by our ~~manufacturing~~product ~~partner~~manufacturer, ~~Huayi~~the ~~Lighting~~distribution, inmarketing ~~China. We~~and ~~continue~~branding toof ~~work~~products ~~with~~and ~~Huayi~~the todevelopment ~~refine~~of ~~the~~sales ~~production~~channels ~~processes~~relating ~~and~~to ~~develop~~our ~~the~~lighting ~~supply~~products ~~chain~~will ~~for~~command management’s primary attention during the ~~components~~next ~~used~~12 inmonths. It will also comprise the ~~manufacturing~~primary use of our ~~bulbs~~financial resources. In We2014, ~~have~~our ~~also~~success ~~hired~~will ~~consultants~~depend inon ~~the~~our ~~United~~ability ~~States~~to reach commercial manufacturing levels for our R30 and inA19 ~~China~~lights, togenerate ~~assist~~market ~~Huayi~~awareness ~~with~~and ~~the~~acceptance ~~manufacturing~~of ~~processes~~our current and ~~quality~~planned ~~control~~lighting ofproducts, ~~the~~protect ~~manufacturing~~our technology through patents and trade secrets, and develop our planned products to meet industry standards. ~~This~~If ~~effort~~we are unable for technological, financial, competitive or other reasons to successfully take these steps, our business and operations will ~~continue~~be inadversely ~~2013~~affected.

Our emphasis on the development of our planned products, the additional manufacturing processes required by our product manufacturer, the distribution, marketing and branding of products and the development of sales channels relating to our lighting products will command management’s primary attention during the next 12 months. It will also comprise the primary use of our financial resources. In 2013, our success will depend on our ability to reach commercial manufacturing levels for our R30 and A19 lights, generate market awareness and acceptance of our current and planned lighting products, protect our technology through patents and trade secrets, and develop our planned products to meet industry standards. If we are unable for technological, financial, competitive or other reasons to successfully take these steps, our business and operations will be adversely affected.

Target Markets and Customers

We are initially targeting the U.S. R30 and R40 reflector lighting market. According to recent reports, the U.S. residential market is comprised of 800 million recessed can lights with more than 140 million bulbs sold per year (“CFL Market Profile,” U.S. Department of Energy, March 2009, and “A Review of the Reflector Compact Fluorescent Lamps Technology Procurement Program: Conclusions and Results,” Pacific Northwest National Laboratory, May 2008). We intend to target the A19 standard Edisonian screw-in lighting market when our technology and manufacturing capabilities are fully established for large scale commercial production.

Significant lighting market drivers are product size, shape, cost, brightness, color rendering, mercury content, dimming capability and energy efficiency. As indicated above, we are directing our product development efforts with awareness of these features. Distribution in this market segment is primarily through electrical and lighting distributors (typically on a regional level) or directly from manufacturers to “big box” retailers.

Strategic Relationship with Product Manufacturer

In October 2011, we entered into a manufacturing agreement with Huayi Lighting ~~Company Ltd.~~, an experienced lighting products manufacturer. Under this exclusive five-year agreement, Huayi Lighting has agreed to produce substantially all of our R30 lights and future lighting products for resale to our customers. Through this agreement, Huayi Lighting is responsible for fabricating the required electronic components of our lights, sourcing the glass components from its multiple approved suppliers and using its established automated processes to assemble and package finished products. We are required to provide estimated quarterly volume requirements to Huayi Lighting during the term of the agreement. We are responsible to pay the upfront costs of specialized production tooling required by Huayi Lighting, and for the cost of additional machinery needed for its assembly lines, to produce our ESL lighting products. Payments to Huayi Lighting under the agreement are based on a negotiated margin above its verified cost to source raw materials and manufacture the product, and payments are made by us in U.S. dollars when the products are delivered to the loading dock in Guangzhou, China for shipment to the west coast of the United States. Our products will be transported to us in bulk via ocean by fully-insured logistics companies. For all lighting products manufactured by Huayi Lighting, the products are warranted to have been made to our required technical specifications and to fully meet applicable quality standards. In connection with the agreement, we granted Huayi Lighting limited license rights to use our technologies and intellectual property for the manufacture of our lights. The manufacturing agreement may be terminated at any time by the parties’ mutual agreement or by us in the event of a material breach under the agreement or failure to deliver products on a timely basis. Additionally, we have the right to independently seek a lower cost supplier to Huayi Lighting during the five-year agreement term under certain circumstances.

We believe that this manufacturing agreement will provide us with a consistent and high caliber source of supply to meet the current and future needs of our customers.

We expect to pay a duty on all lighting products that we import from China. This duty is expected to represent a 3.9% mark-up to factory invoice.

Sales, Marketing and Distribution

During ~~2012~~2013, we continued our marketing initiatives to determine our initial marketing strategy and begin branding and corporate positioning. Our marketing efforts have included market research to determine market size, competition, product features, consumer attitudes, pricing, certifications, government agencies, grants, target sales channels and retailers, branding and creation of initial marketing collateral. We have also had strategic and pre-contractual meetings with certain retailers and potential channel and distribution partners to determine levels of interest in our lighting products and ESL technology. We believe that the results of these meetings were positive, but no significant customer agreements have been entered into to date.

During 2011, we also initiated our efforts to sell our lights directly to consumers through an online order facility at our company’s corporate website. We began shipping orders through this facility during the second quarter of 2011. We currently intend to outsource our online order facility to an e-commerce fulfillment service provider to enable consumers to more efficiently buy our lights and review our product catalog. In early 2011, we also selected a vendor to assist us with the specific packaging and display design requirements of “big box” retailers.

We intend to adopt inventory-carrying practices, together with the terms under which we sell our lighting products (including payment and delivery terms), that are customary in the lighting products markets.

Twenty states have enacted Conservation Improvement Programs (CIP). Through a CIP, electric and natural gas utilities are required to invest a portion of their state revenues in projects designed to reduce their customers' consumption of electricity and natural gas, and to generally improve resource efficiency. One form of CIP investment is conducting “give-aways” of energy efficient lighting products. Alternatively, some states provide cash rebates to lighting manufacturers, stores or directly to the consumer. We have met with a number of utilities and utility groups to determine interest in the promotion of ESL energy efficient lighting products. We believe that the results of these meetings were positive, but no agreements in this regard have been entered into to date.

Our technology has been featured on the Discovery Channel website, Popular Science magazine and website, CNET website and on The New York Times website.

Intellectual Property, Patents and Proprietary Rights

We have filed nine U.S. and related foreign patent applications, of which four patents have been granted. These patents cover important features of our current and planned lighting technology and products. We expect to apply for additional patent protection on our ESL technology and our manufacturing processes both domestically and internationally in the future. We believe that our technology has unique aspects that are patentable; however, there can be no assurance that any patent application will be granted or, if granted, that it will be defensible.

We protect our intellectual property rights through a combination of patent, trademark, trade secret laws and other methods of restricting disclosure, and requiring our independent consultants, strategic vendors and suppliers to sign non-disclosure agreements, as well as assignment of inventions agreements, when appropriate.

Raw Materials and Supplies

Development and production of our lighting products will require certain raw materials, including glass, electronics, coatings, certain chemicals and chemical compounds, plastic and packaging. Pursuant to our manufacturing agreement with Huayi Lighting Company Ltd., Huayi Lighting assumed sole responsibility for sourcing these raw materials. Huayi Lighting has advised us that it has multiple dedicated supply agreements with glass and other suppliers, and maintains relationships with alternative suppliers for raw materials and specialized component needs. We do not anticipate raw material shortages in the foreseeable future.

Research and Product Development

We spent approximately $~~0.5~~647,000 ~~million~~ during fiscal ~~2012~~2013 and approximately $~~3.7~~547,000 ~~million~~ during fiscal ~~2011~~2012, in our product development efforts.

~~We retained certain key members of the former Sendio development team as temporary consultants subsequent to the insolvency of Sendio to assist in the transition to Huayi Lighting.~~ During 2012, we established a U.S. based research and development team, and ~~we intend~~ in ~~the~~February, ~~future~~2014 towe ~~establish~~established a research and development center in the U.S. to develop new products for the lighting industry by taking advantage of the latest technology advancements. We expect to collaborate closely with Huayi Lighting Company Ltd. and other subcontractors which use standard production processes to ensure that new lighting products can be produced quickly, and at the lowest cost and highest quality.

Government Regulation and Industry Certification

In October 2010, we obtained safety certification from UL for our R30 reflector light. This certification enables us to sell our ESL lighting products in the United States and Canada. In June 2011, we submitted our A19 light to UL for safety certification and, in August 2011, received that certification.

Any commercial lighting products that we develop in the future will require certifications from an independent third party testing laboratory prior to their sale. There is presently no Energy Star® certification standard for our products. In addition, we may be subject to other certifying agencies and other regulatory approvals. The approvals and certifications required will be determined based upon the markets that we enter. We are designing our lighting products to meet the standards for certification from independent third party laboratories, and we intend to submit an application to the appropriate testing laboratory once we have completed the necessary development and manufacturing processes required to obtain certification. We cannot predict whether we will obtain any future required certification from an independent third party testing laboratory or any other regulatory agency.

Our activities currently are subject to no particular regulation by governmental agencies other than that routinely imposed on corporate businesses, and no such regulation is now anticipated.

Competition

Our market segment is highly competitive and traditionally dominated by several large competitors such as General Electric Company, Philips Electronics NV and Osram Sylvania. These entities possess far more substantial financial, human and other resources than we do. There are also hundreds of small manufacturers of low-end products – many inexpensive and often poor performing compact fluorescent lamps. Many companies are now developing products utilizing solid-state LED technology. As energy efficient technologies are adopted, it is likely that the industry will continue to be dominated by large competitors who will often outsource manufacturing to smaller companies. Research will continue on incandescent type technologies such as halogen infrared reflecting. Abandoned technologies such as induction lighting may temporarily re-emerge. Based on meetings over the last four years with electric utilities, U.S. Department of Energy consultants, electrical distributors and major retailers, we have not identified any competitors with a similar technology to ESL.

Environmental Compliance

We are not aware of any material effects that compliance with federal, state, local or foreign environmental protection laws or regulations will have on our business. We have not expended material amounts to comply with any environmental protection laws or regulations and do not anticipate having to do so in the foreseeable future.

Employees

As of December 31, ~~2012~~2013, we had no employees. We have routinely used consultants in our U.S. operations and strategic vendors on a work-for-hire contract basis. ~~None~~We ofdo ~~our~~not ~~employees~~have ~~are~~any ~~subject to a~~ collective bargaining ~~agreement~~agreements in place and we consider relations with ~~employees~~our key consultants to be good.

ITEM 1A. RISK FACTORS

Risks Related to Our Business and Industry

We have historically been a research and product development company. We have a limited operating history with minimal revenue to date, so it may be difficult to evaluate our business and prospects. We also received a going concern qualification in our ~~2012~~2013 audit.

We have been primarily engaged during the last eight years in the research and development of our lighting products, and have incurred significant operating losses. During ~~2012~~2013, we focused on initiatives to ~~transition~~develop our manufacturing operations towith Huayi Lighting ~~from our former facility in the Czech Republic, which in the past has primarily provided us with product testing, engineering development and pilot production of our initial products~~. These initiatives also included continued efforts to work with Huayi Lighting to refine the manufacturing processes and developing quality control testing necessary for quantity manufacturing. Our progress has been limited, primarily due to lack of adequate funding necessary to execute our business plan. These initiatives are ongoing and, as a result, we had no revenues in ~~2012~~2013 ~~and~~or ~~minimal revenue in 2011~~2012. We currently depend on third-party financing to fund our operations. We have a very limited operating history upon which an investor can evaluate our business and prospects, and we may never generate significant revenue or achieve net income. Peterson Sullivan, LLP, our independent registered public accounting firm, in its opinion on our financial statements for the year ended December 31, ~~2012~~2013, raised substantial doubt about our ability to continue as a going concern due to our net losses and negative cash flows from operations and other factors.

We have incurred historical losses and, as a result, may not be able to generate profits, support our operations or establish a return on invested capital, which can have a detrimental effect on the long-term capital appreciation of our common stock.

We incurred a net loss in ~~2012~~2013 of $35.90 million and had an accumulated deficit of $8388.4 million as of December 31, ~~2012~~2013. We cannot predict when or whether we will ever realize a profit or otherwise establish a return on invested capital. Our business strategies may not be successful and we may never generate significant revenues or profitability, in any future fiscal period or at all.

We are presently in default on approximately $1.4 million of principal of our unsecured, Convertible Debentures.

As of the date of this annual report, the outstanding principal amount of approximately $1.4 million plus accrued interest and penalties under our original issue discount convertible debentures is due and owing by us. We have been in default to the holders of the debentures since June 22, 2013, when the debentures matured. We continue to not have sufficient financial resources, or the ability to arrange financing, to pay the outstanding amount of the debentures at this time. Our failure to pay the outstanding amount when due last year has resulted in our obligation to pay holders interest at the default rate of 18% per year and to pay a mandatory default amount of an additional 10% of the outstanding principal amount of the debentures. Although we have periodically discussed a work-out with some debenture holders, no such agreement currently exists. There can be no assurance that debenture holders have not already or will not in the future take legal action against us to collect the indebtedness due and owing under the debentures or initiate or join in a bankruptcy or insolvency case or proceeding relating to us. Should debenture holders take any such actions, our company will be seriously impacted and we may not be able to continue in business. See Footnote 6 in the Notes to the Consolidated Financial Statements contained elsewhere in this report.

We are presently in default on approximately $0.1 million of principal on our partially secured Loans payable.

As of the date of this annual report, the outstanding principal amount of $100,000 under our Notes Payable is due and owing by us. We have been in default to the holders of the debentures since June 23, 2013, when the loans matured. The loans are secured by a Deed of Assignment for certain future inventory and all proceeds from the sale of that inventory. We continue to not have sufficient financial resources, or the ability to arrange financing, to pay the outstanding amount of the debentures at this time. Our failure to pay the outstanding amount when due last year has resulted in our obligation to pay holders interest at the default rate of 109.5% per annum from the date of default. There can be no assurance that note holders have not already or will not in the future take legal action against us to collect the indebtedness due and owing under the notes or initiate or join in a bankruptcy or insolvency case or proceeding relating to us. Should note holders take any such actions, our company will be seriously impacted and we may not be able to continue in business. See Footnote 8 in the Notes to the Consolidated Financial Statements contained elsewhere in this report.

We have a number of technology issues to resolve before we will be able to successfully manufacture a full line of commercially viable lighting products.

Although we have completed initial engineering and obtained UL certification of our initial R30 reflector light, further development work and third-party testing will be necessary before the technology can be deployed and production of a full line of lighting products can be commenced. ~~Specifically, we are continuing to work on our standard Edisonian A19 screw-in light, including obtaining acceptable life and output specifications.~~ If we are unable to solve current and future technology issues, we may not be able to offer ~~a full line of~~ commercially viable products. In addition, if we encounter difficulty in solving technology issues, our research and development costs could increase substantially and our development and production schedules could be significantly delayed.

We have experienced delays in executing our business plan, and further delays will reduce the likelihood that we will be able to manufacture lighting products or generate sufficient revenue to stay in business.

We have previously experienced delays in executing our business plan. These delays are attributable to a number of factors, including:

· unanticipated difficulties and increased expenses in developing our ESL technology, · unanticipated difficulties in establishing large scale commercial manufacturing, quality control and sourcing processes, and · our inability to obtain funding in a timely manner.

In the future, we may experience delays caused by these and other factors. Our business must be viewed in light of the problems, expenses, complications and delays frequently encountered in connection with the development of new technologies, products, markets and operations. If we are unable to anticipate or manage challenges confronting our business in a timely manner, we may be unable to continue our operations.

We must successfully develop, introduce, market and sell lighting products and manage our operating expenses.

To be a viable business, we must successfully develop, introduce, market and sell products and manage our operating expenses. Many of our lighting products are still in development and are subject to the risks inherent in the development of technology products, including unforeseen delays, expenses, patent challenges and complications frequently encountered in the development and commercialization of technology products, the dependence on and attempts to apply new and rapidly changing technology, and the competitive environment of the industry. Many of these events are beyond our control, such as unanticipated development requirements, delays and difficulties with obtaining third-party certification, delays in submitting documentation for and being granted patents and establishing manufacturing and distribution relationships. Our success also depends on our ability to maintain high levels of employee utilization, manage our production costs, sales and marketing costs and general and administrative expenses, and otherwise execute on our business plan. We may not be able to effectively and efficiently manage our development and growth. Any inability to do so could increase our expenses and negatively impact our results of operations.

We rely solely on Huayi Lighting Company to manufacture the ESL lighting products we sell to customers and to source the required raw materials.

Our business prospects depend significantly on our ability to obtain ESL lighting products for sale to our customers. Our manufacturing agreement with Huayi Lighting Company Ltd. provides us with a single source for our ESL lights. Through this agreement, Huayi Lighting is responsible for fabricating the required electronic components of our lights, sourcing the glass components from its suppliers and using its established automated processes to assemble and package finished products. Huayi Lighting is located in the People’s Republic of China, where shipments of product to us could be delayed, rerouted, lost or damaged. Our inability to obtain finished products from Huayi Lighting in accordance with our required technical specifications and on a timely basis due to shipping delays, manufacturing problems or its failure to obtain required raw materials would have a material adverse effect on our revenue from product sales, as well as on our ability to support our customers’ purchase requirements, which could result in loss of customers and damage to our reputation. We may also be subject to the risk of fluctuations in raw material prices, since our arrangement with Huayi Lighting provides that increases and decreases in the prices of such raw materials obtained from local China-based vendors are passed through to us in the form of adjusted final finished good prices charged by Huayi Lighting.

We may face additional barriers and tariffs as a result of importing our lighting products from China, which could increase our prices and make our products less desirable.

We expect to pay a duty on all lighting products that we import from China. This duty is expected to represent a 3.9% mark-up to factory invoice. We will also bear related importing costs such as customs inspection fees and ocean freight charges. In the future, China and the United States may create additional barriers to business between our China-based product manufacturer and us, including new tariffs, costs, restrictions, controls or embargos that could negatively impact our business and operating results. New or increased tariffs would likely result in higher prices (and potentially lower sales volumes) and lower operating margins on our products.

We rely heavily on a few consultants, the loss of whom could have a material adverse effect on our business, operating results and financial condition.

Our future success will depend in significant part upon the continued services of our executive officers and directors and certain key consultants, and our ability to attract, assimilate and retain highly qualified technical, managerial and sales and marketing personnel when needed. Competition for quality personnel is intense, and there can be no assurance that we can retain our existing key personnel or that we will be able to attract, assimilate and retain such employees in the future when needed. The loss of key personnel or the inability to hire, assimilate or retain qualified personnel in the future could have a material adverse effect on our business.

We rely on outside vendors to manage certain key business processes, and any failure by them to perform will negatively affect our business.

We have outsourced certain of our key business processes. If any of our service providers fail to perform at a satisfactory level, our business development will be negatively affected and delayed, and our reputation may be harmed.

Our future operating results are difficult to predict; thus, the future of our business is uncertain.

Due to our limited operating history and the significant development and manufacturing objectives that we must achieve to be successful, our quarterly and annual operating results are difficult to predict and are expected to vary significantly from period to period. In addition, the amount and duration of losses will be extended if we are unable to develop and manufacture our products in a timely manner. Factors that could inhibit our product development, manufacturing and future operating results include:

·	failure to solve existing or future technology-related issues in a timely manner,

·	failure to obtain sufficient financing when needed,

·	failure to secure key manufacturing or other strategic business relationships, and

·	competitive factors, including the introduction of new products, product enhancements and the introduction of new or improved technologies by our competitors, the entry of new competitors into the lighting markets and pricing pressures.

We face currency risks associated with fluctuating foreign currency valuations.

Although we use U.S. dollars to pay Huayi Lighting, increases in the value of the Chinese Yuan Renminbi would have an adverse affect on their manufacturing costs and therefore our bulb cost may be adversely affected. To date, we have not entered into foreign currency contracts or other currency-related derivatives to mitigate the potential impact of foreign currency fluctuations.

Because we are smaller and have fewer financial resources than most of our competitors, we may not be able to successfully compete in the very competitive lighting industry.

The lighting industry is very competitive and we expect this competition to continue to increase. The general illumination market segment within the lighting industry is dominated by a number of well-funded multi-national companies such as General Electric Company, Phillips Electronics NV and Osram Sylvania, that have established products and are developing new products that compete with our current and planned lighting products. We may not be able to compete effectively against these or other competitors, most of whom have substantially greater financial resources and operating experience than we do. Many of our current and future competitors may have advantages over us, including:

·	well established products that dominate the market,

·	longer operating histories,

·	established customer bases,

·	substantially greater financial resources,

·	well established and significantly greater technical, research and development, manufacturing, sales and marketing resources, capabilities and experience, and

·	greater name recognition.

Our current and potential competitors have established, and may continue to establish in the future, cooperative relationships among themselves or with third parties that would increase their market dominance and negatively impact our ability to compete with them. In addition, competitors may be able to adapt more quickly than we can to new or emerging technologies and changes in customer needs, or to devote more resources to promoting and selling their products. If we fail to adapt to market demands and to compete successfully with existing and new competitors, our results of operations could be materially adversely affected. The market for lighting technology is changing rapidly and there can be no assurance that we will be able to compete, especially in light of our limited resources. There can be no assurance that any of our current or planned lighting products can compete successfully on a cost, quality or market acceptance basis with competitors’ products and technologies.

We depend on our intellectual property. If we are unable to protect our intellectual property, we may be unable to compete and our business may fail.

Our success and ability to develop our technology and create products and become competitive depend to a significant degree on our ability to protect our proprietary technology, particularly any patentable material. We rely on a combination of patent, trademark, trade secret and other intellectual property laws, nondisclosure agreements and other protective measures to preserve our rights to our technology. In addition, any intellectual property protection we seek may not preclude competitors from developing products similar to ours. In addition, the laws of certain foreign countries do not protect intellectual property rights to the same extent as do the laws of the United States.

We do not currently have sufficient available resources to defend a lawsuit challenging our intellectual property rights or to prosecute others who may be infringing our rights. Accordingly, even if we have strong intellectual property rights and patent rights, we may not be able to afford to engage in the necessary litigation to enforce our rights.

We compete in industries where competitors pursue patent prosecution worldwide and patent litigation is customary. At any given time, there may be one or more patent applications filed or patents that are the subject of litigation, which, if granted or upheld, could impair our ability to conduct our business without first obtaining licenses or granting cross-licenses, which may not be available on commercially reasonable terms, if at all. We have several patent applications pending in the United States and internationally and we expect to file additional patent applications; however, none of these patents may ever be issued. We do not perform worldwide patent searches as a matter of custom and, at any given time, there could be patent applications pending or patents issued that may have an adverse impact on our business, financial condition and results of operations.

Other parties may assert intellectual property infringement claims against us, and our products may infringe on the intellectual property rights of third parties. Intellectual property litigation is expensive and time consuming and could divert management’s attention from our business and could result in the loss of significant rights. If there is a successful claim of infringement, we may be required to develop non-infringing technology or enter into royalty or license agreements which may not be available on acceptable terms, if at all. In addition, we could be required to cease selling any of our products that infringe on the intellectual property rights of others. Successful claims of intellectual property infringement against us may have a material adverse effect on our business, financial condition and results of operations. Even successful defense and prosecution of patent suits is costly and time consuming.

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 and other proprietary information, we require employees, consultants, 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 protect our proprietary information as we conduct discussions with potential strategic partners. If we are unable to protect the proprietary nature of our technologies, it may have an adverse impact on our business, financial condition and results of operations.

Failure to obtain and maintain industry certification for our lighting products could cause an erosion of our current competitive strengths.

We are designing our lighting products to be UL or ETL (an Intertek listed mark for product compliance to North American safety standards) compliant and intend to seek Energy Star certification, as well as appropriate certifications in the European Union and in other countries. UL or ETL compliance certification is a key standard in the lighting industry, and if we fail to obtain or maintain this standard we may not have any market interest for our products. We may not obtain this certification or we may be required to make changes to our lights, which would delay our commercialization efforts and would negatively harm our business and our results of operations.

Rapid technological changes and evolving industry standards could result in our lighting products becoming obsolete and no longer in demand.

The lighting industry is characterized by rapid technological change and evolving industry standards and is highly competitive with respect to timely product innovation. The introduction of lighting products embodying new technology and the emergence of new industry standards can render existing products and technologies obsolete and unmarketable. Our success will depend in part on our ability to successfully develop commercial applications for our technology, anticipate and respond to technology developments and changes in industry standards, and obtain market acceptance on any products we introduce. We may not be successful in the development of our ESL technology, and we may encounter technical or other serious difficulties in our development or commercialization efforts that would materially and adversely affect our results of operations.

Despite government regulations aimed at eliminating the production of traditional incandescent light bulbs, consumer and political opposition could cause delays in the implementation of those regulations, possibly delaying the pace and impact of our future market penetration.

There has been consumer, political and media resistance from time to time to government regulations mandating the use of energy-efficient lighting, including the elimination of the production of traditional incandescent light bulbs, owing to the low cost of incandescent light bulbs, their easy and broad availability and concerns about other alternatives such as mercury contamination with CFLs. In the event implementation of these government regulations is delayed, we may experience a delay in the pace with which our products may be able to penetrate the general lighting products market.

If we fail to maintain proper and effective internal controls in the future, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, investors’ views of us and, as a result, the value of our common stock.

Ensuring that we have effective internal control over financial reporting and disclosure controls and procedures in place is a costly and time-consuming effort that needs to be frequently evaluated. As a public company, we conduct an annual management assessment of the effectiveness of our internal controls over financial reporting in compliance with Section 404 of the Sarbanes-Oxley Act of 2002. As a smaller reporting company, we are not currently required to receive a report from our independent registered public accounting firm addressing the effectiveness of our internal controls over financial reporting. As we grow, it may be necessary in the future to update our internal controls over financial reporting on the basis of periodic reviews. If we are not able to comply with the requirements of Section 404, or if we (or our independent registered public accounting firm) identify deficiencies in our internal controls over financial reporting that could rise to the level of a material weakness, we may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal controls over financial reporting, we will be unable to assert that our internal controls over financial reporting are effective. If we are unable to assert that they are effective (or if our independent registered public accounting firm is unable in the future to express an opinion on the effectiveness of our internal controls over financial reporting), we could be subject to investigations or sanctions by the SEC or other regulatory authorities, and we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause an adverse effect on the market price of our common stock, our business, reputation, financial position and results of operation. In addition, we could be required to expend significant management time and financial resources to correct any material weaknesses that may be identified or to respond to any regulatory investigations or proceedings.

Risks Related to our Securities

Our historic stock price has been volatile and the future market price for our common stock is likely to continue to be volatile. This may make it difficult for you to sell our common stock for a positive return on your investment.

The public market for our common stock has historically been volatile. Any future market price for our shares is likely to continue to be volatile. This price volatility may make it more difficult for you to sell shares when you want at prices you find attractive. The stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of specific companies. Broad market factors and the investing public’s negative perception of our business may reduce our stock price, regardless of our operating performance. Further, the market for our common stock is limited and we cannot assure you that a larger market will ever be developed or maintained. Market fluctuations and volatility, as well as general economic, market and political conditions, could reduce our market price. As a result, these factors may make it more difficult or impossible for you to sell our common stock for a positive return on your investment.

Our management and SAM Special Opportunities Fund, L.P. own a substantial amount of our stock and are capable of influencing our affairs.

As of December 31, 2012, our executive officers and directors (and their respective affiliates) beneficially owned approximately 28.6% of our outstanding common stock, with SAM Advisors, LLC, an investment advisor controlled by William B. Smith, our Chairman, beneficially owning approximately 17.7% of our outstanding common stock. As a result, these shareholders substantially influence our management and affairs and, if acting together, control most matters requiring the approval by our shareholders including the election of directors, any merger, consolidation or sale of all or substantially all of our assets and any other significant corporate transactions. The concentration of ownership may delay or prevent a change of control at a premium price.

Our management and SAM Special Opportunities Fund, L.P. own a substantial amount of our stock and are capable of influencing our affairs.

As of December 31, 2013, our executive officers and directors (and their respective affiliates) beneficially owned approximately 20.0% of our outstanding common stock, with SAM Advisors, LLC, an investment advisor controlled by William B. Smith, our Chairman, beneficially owning approximately 11.4% of our outstanding common stock. As a result, these shareholders substantially influence our management and affairs and, if acting together, control most matters requiring the approval by our shareholders including the election of directors, any merger, consolidation or sale of all or substantially all of our assets and any other significant corporate transactions. The concentration of ownership may delay or prevent a change of control at a premium price.

Our articles of incorporation contain authorized, unissued preferred stock which, if issued, may inhibit a takeover at a premium price that may be beneficial to you.

Our articles of incorporation allow us to issue up to 10,000,000 shares of preferred stock without further stockholder approval and upon such terms and conditions, and having such rights, preferences, privileges and restrictions as the board of directors may determine. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of holders of any preferred stock that may be issued in the future. In addition, the issuance of preferred stock could have the effect of making it more difficult for a third party to acquire control of, or of discouraging bids for control of our company. This could limit the price that certain investors might be willing to pay in the future for shares of common stock. We have no current plans to issue any shares of preferred stock.

Shares of stock issuable pursuant to our stock options, warrants, convertible debentures and underwriters’ warrants may adversely affect the market price of our common stock.

As of December 31, ~~2012~~2013, we have outstanding under our 2007 Stock Incentive Plan stock options to purchase ~~309~~595,~~004~~088 shares of common stock, outstanding warrants to purchase 24,~~012~~772,~~034~~228 shares of common stock and outstanding convertible debentures to acquire ~~374~~1,~~346~~152,223 shares of common stock. The exercise or conversion of these securities and sales of common stock issuable pursuant to them, would reduce a stockholder’s percentage voting and ownership interest.

The stock options, warrants and convertible debentures are likely to be exercised when our common stock is trading at a price that is higher than the exercise or conversion price of these securities, and we would be able to obtain a higher price for our common stock than we will receive under such securities. The exercise or conversion, or potential exercise or conversion, of these stock options, warrants and convertible debentures could adversely affect the market price of our common stock and adversely affect the terms on which we could obtain additional financing, if needed.

The large number of shares eligible for future sale may adversely affect the market price of our common stock.

The sale, or availability for sale, of a substantial number of shares of common stock in the public market could materially and adversely affect the market price of our common stock and could impair our ability to raise additional capital through the sale of our equity securities. At December 31, ~~2012~~2013, there were 710,~~130~~576,~~226~~097 shares of common stock issued and outstanding. Of these shares, approximately 59,~~785~~886,~~020~~097 are freely transferable. Our executive officers and directors beneficially own 12,~~345~~135,~~206~~337 shares, which would be eligible for resale, subject to the volume and manner of sale limitations of Rule 144 under the Securities Act. An additional 1690,~~043,674~~000 shares are “restricted shares,” as that term is defined in Rule 144, and are eligible for sale under the provisions of Rule 144.

Our common stock is currently considered a “penny stock” and may be difficult to sell unless we obtain a Nasdaq listing.

Our common stock is subject to certain rules and regulations relating to “penny stock.” A “penny stock” is generally defined as any equity security that has a price less than $5.00 per share and that is not quoted on a national securities exchange such as Nasdaq. Being a penny stock generally means that any broker who wants to trade in our shares (other than with established clients and certain institutional investors) must comply with certain “sales practice requirements,” including delivery to the prospective purchaser of the penny stock a risk disclosure document describing the penny stock market and the risks associated with it. These penny stock rules make it more difficult for broker-dealers to recommend our common stock and, as a result, our stockholders may have difficulty in selling their shares in the secondary trading market. This lack of liquidity may also make it more difficult for us to raise capital in the future through the sale of our equity securities.

We do not intend to pay cash dividends on our common stock, so any return on investment must come from appreciation.

We have never declared or paid any cash dividends on our common stock and do not intend to pay cash dividends in the foreseeable future. We intend to invest all future earnings, if any, to fund our growth. Therefore, any investment return in our common stock must come from increases in the trading price of our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable

ITEM 2. PROPERTIES

We do not own any real property.

As of December 31, ~~2012~~2013, our corporate headquarters consisted of approximately 200 square feet, located in New York, New York, for total rent per month of $2,035.

OnEffective ~~July~~February 111, ~~2011,~~2014 we entered into a ~~month~~two toyear ~~month~~ lease for our research and development facility and corporate headquarters, consisting of approximately 4,600 square feet of office and light industrial space located in ~~New~~Berkeley, ~~Hampshire~~California in the United States. ~~Monthly~~ ~~rental~~Our ~~payments~~lease obligations are $155,~~445~~000, ~~under~~$60,000 and $5,000 for the ~~lease. This~~years ~~lease~~ended ~~was~~December ~~terminated~~31, in2014, ~~April~~2015 ~~2012~~and 2016, respectively.

Our pilot production facility and research and development laboratories were located in Olomouc in the Czech Republic. We occupied the entire 75,000 square-foot facility. In 2008, we entered into a purchase agreement with the landlord to acquire the building and property at which this facility is located for approximately $8,735,000 (or approximately 155,776,900 Czech koruna) payable by June 30, 2013. In February 2012, we filed a petition of insolvency for Sendio. Our lease for the premises was terminated effective March 15, 2012 and our obligation to acquire the building was terminated on February 8, 2012. See Note 6 to the Notes to Consolidated Financial Statements for a further discussion of the lease and purchase agreements.

ITEM 3. LEGAL PROCEEDINGS

On February 13, 2012, Sendio filed a petition of insolvency with the Regional Court in Olomouc, Czech Republic. In March 2012, the court determined that Sendio was insolvent, and control of the legal entity passed to a court appointed trustee. The trustee will oversee the orderly sale of the assets and use the proceeds to satisfy the liabilities of Sendio. Our lease for the Sendio premises was terminated effective March 15, 2012 and our obligation to acquire the building was terminated on February 8, 2012.

Our lease obligation and the obligation to purchase the Sendio facility have been terminated, as discussed in Note 6 to the Notes to Consolidated Financial Statements. Our lease for the premises was terminated effective March 15, 2012 and our obligation to acquire the building was terminated on February 8, 2012.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

PRICE RANGE OF COMMON STOCK

Our common stock ~~has~~is ~~been~~ quoted on the OTC Bulletin Board under the trading symbol ~~VUOCD since June 5, 2008~~VUOC. The following table sets forth the range of high and low trading prices as reported by the OTC Bulletin Board for the periods indicated.

	Year ended December 31,
Quarter	2011				2012
	2012				2013
	High		Low		High		Low
Quarter	High		Low		High		Low
First	$	126.4000	$	84.8011	$	62.0075	$	40.1162
Second	$	105.0031	$	72.0060	$	51.3172	$	21.6016
Third	$	93.2095	$	71.2080	$	31.9578	$	1.8000
Fourth	$	82.0025	$	40.1955	$	21.2545	$	01.5500

These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions. ~~These prices have been adjusted from the actual prices for such periods to reflect the 1-for-20 reverse stock split which took place on November 23, 2011.~~

The closing price of our common stock on March 20, ~~2013~~2014 was $10.7488 per share.

As of March 20, ~~2013~~2014, we had ~~214~~244 stockholders of record and approximately 2,800 beneficial owners of common stock.

Securities Authorized for Issuance Under Equity Compensation Plans

On October 26, 2007, our board of directors approved the Vu1 Corporation 2007 Stock Incentive Plan (the “Plan”). The stockholders approved the Plan on May 22, 2008. In March 2011, the board of directors increased the number of shares authorized for issuance under the Plan from 500,000 to a total of 1,000,000 shares. A majority of our stockholders approved the amendment to the Plan on October 10, 2011. On August 26, 2013 the board of directors increased the number of shares authorized for issuance under the 2007 Stock Incentive Plan by 1,500,000 shares to a total of 2,500,000 shares. We intend to seek stockholder approval in 2014. The following table gives information as of December 31, ~~2012~~2013, the end of our most recently completed fiscal year, about shares of common stock that may be issued upon the exercise of options, warrants and rights under the Plan.

Equity Compensation Plan Information

Plan category

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future ~~issuanc~~issuance e under equity compensation plans (excluding securities reflected in column (a))

(a)

(b)

(c)

Equity compensation plans not approved by security holders

-1,200,000

Equity compensation plans approved by security holders

~~309~~595,~~004~~088

116.6215

~~383~~23,~~614~~299

Totals

~~309~~595,~~004~~088

116.6215

~~383~~1,~~614~~223,299

A description of the Plan can be found in Note ~~11to~~10 to the Notes to Consolidated Financial Statements contained in this Annual Report.

Sales of Unregistered Securities

The following provides information regarding sales of equity securities by us during the fiscal year ended December 31, ~~2012~~2013, which were not registered under the Securities Act.

~~From~~On January ~~24 to November 21~~25, ~~2012,~~2013 we ~~sold~~completed ~~474,632 units at~~ a ~~subscription~~private ~~price~~placement ofto ~~$3.50~~accredited ~~per~~investors ~~unit for proceeds~~ of $1105,~~661,199~~000 inrestricted ashares ~~unit private placement. Each unit consisted~~ of ~~one~~our ~~share of~~ common stock, ~~and~~at a ~~three-year warrant to~~ purchase ~~one share of common stock at an exercise~~ price of $31.7500 per share~~. A total of 474~~,~~632~~ ~~shares~~for ofgross ~~common~~proceeds ~~stock and warrants to purchase 474,632 shares~~ of ~~common stock at an exercise price of~~ $3105,000.~~75 were issued.~~ ~~Included~~As inpart ~~these amounts were 12,000 shares~~ of ~~our~~the ~~common~~private ~~stock and 12~~placement,~~000~~ ~~warrants issued upon~~ the ~~conversion~~investors ofwere ~~$42,000~~issued inthree-year ~~accounts~~warrants ~~payable~~ to apurchase ~~vendor and 55~~105,~~267~~000 shares of our common stock ~~and 55~~,~~267~~ ~~warrants~~at ~~issued~~an ~~upon the conversion of loans totaling $193,431 (including accrued interest and loan fees of $18,431). In October, 2012 we reduced the~~ exercise price of ~~the warrants from~~ $31.7550 per share ~~to $2~~.~~00 per share as discussed in Note 11 of the Notes to the Consolidated Financial Statements.~~

From ~~January~~April 1,9 ~~2012~~ to ~~May~~July 11, ~~2012,~~2013 we ~~issued~~raised ~~4,734~~gross ~~shares~~proceeds of ~~common~~$871,000 ~~stock~~in a unit private placement to ~~our~~accredited ~~former~~investors ~~Chief~~at ~~Operating~~a ~~Officer~~price ~~and~~of ~~President~~$1.50 ~~upon~~per ~~the~~unit. Each ~~conversion~~unit is comprised of ~~$37,869~~one share of ~~compensation~~common stock and one three-year warrant to purchase common stock at aan exercise price of $82.00 per share. Included ~~pursuant~~in the proceeds is $110,000 of principal and interest which was converted into the unit offering as described in Note 8. Also included is $10,000 received from a member of our board of directors. We issued an aggregate of 580,667 shares of common stock and warrants to ~~his~~purchase ~~employment~~580,667 ~~contract~~shares of common stock at an exercise price of $2.00 per share.

OnFrom ~~June~~October 1,10 ~~2012~~to December 31, 2013 we ~~granted~~received agross ~~total~~proceeds of ~~148~~$650,~~500~~000 ~~shares~~from ofaccredited ~~restricted~~investors ~~common~~at ~~stock~~a toprice ~~the~~of ~~six~~$1.00 ~~non-executive~~per ~~board~~unit ~~members~~and ~~for~~issued ~~service~~650,000 onshares ~~the board~~ of ~~directors. The~~common ~~shares~~stock ~~had~~and atwo-year ~~fair~~warrants ~~value~~to ofpurchase ~~$504~~650,~~900~~000 ~~based~~shares onof ~~the~~common ~~closing~~stock ~~market~~at an exercise price of $31.4025 onper ~~the date of grant~~share. ~~The shares vest on June 1, 2013.~~

OnDuring ~~August~~the ~~17,~~year ~~2012~~ended December 31, 2013 we ~~granted~~issued 2048,~~000~~842 shares of ~~restricted~~ common stock towith ~~an officer for service. The shares had~~ a fair value of $4475,~~800~~000 to SAM Advisors, LLC. The issuances were based on the closing market ~~price~~prices as of the date of issuance pursuant to our agreement to convert their $~~2.24~~12,500 monthly consulting fee to stock at the closing market price on the ~~date~~last business day of ~~grant~~each month. ~~The~~ ~~shares~~SAM ~~vest~~Advisors, onLLC ~~August~~is 17an entity controlled by William B. Smith, ~~2013~~our chairman and chief executive officer.

OnDuring ~~September~~the ~~11,~~year ~~2012~~ended December 31, 2013 we issued 126,~~500~~143 shares of common stock with a fair value of $3011,~~625~~250 to Charles Hunt, a member of our board of directors. The issuances were based onin the closing market ~~price~~prices as of ~~that~~the date of issuance pursuant to aour ~~vendor~~agreement ~~for~~to ~~services~~convert $3,750 of his monthly consulting fee to stock at the closing market price on the last business day of each month.

Effective July 24, 2012, we issued 59,000 shares of our restricted common stock valued at $142,780 based on the closing market price for our common stock of $2.42 per share pursuant to an agreement with a vendor for investor relations services. Effective August 31, 2012, we terminated the contract pursuant to its terms and cancelled the issuance of 52,858 shares.

From August 31, 2012 to December 31, 2012, we issued 56,208 shares of common stock with a fair value of $62,500 to SAM Advisors, LLC. The issuances were based in the closing market prices as of the date of issuance pursuant to our agreement to convert their $12,500 monthly consulting fee to stock at the closing market price on the last business day of each month. SAM Advisors, Inc. is an entity controlled by William B. Smith, our Chairman and Chief Executive Officer.

On December 20, 2012, we completed a private placement to accredited investors of 525,000 restricted shares of common stock, at a purchase price of $0.80 per share, for gross proceeds of $420,000. As part of the private placement, the investors were issued three-year warrants to purchase 525,000 shares of common stock, at an exercise price of $1.50 per share.

On December 20, 2012, we entered into a settlement and release agreement with a vendor and issued 250,000 shares of our restricted common stock and three-year warrants to purchase 250,000 shares of common stock at an exercise price of $1.50 per share, in settlement of $250,000 of trade accounts payable.

On December 20, 2012, we entered into a settlement and release agreement with another vendor and issued 64,256 shares of our restricted common stock in settlement of $64,256 of trade accounts payable.

The securities sold in the transactions described above were exempt from registration under Section 4(2) of the Securities Act of 1933 as a sale by an issuer not involving a public offering or under Regulation D promulgated pursuant to the Securities Act of 1933. None of the securities were registered under the Securities Act, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(2) and Regulation D (Rule 506) under the Securities Act and corresponding provisions of state securities laws, which exempts transactions by an issuer not involving any public offering. Such securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements and certificates evidencing such shares contain a legend stating the same.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and notes thereto appearing elsewhere in this Annual Report. Except for historical information, the following discussion contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. See “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors.”

Overview

We are focused on designing, developing and selling a line of mercury-free, energy efficient lighting products based on our proprietary light-emitting technology. For the past several years, we have primarily focused our efforts on research and product development of our Electron Stimulated Luminescence™ (ESL) technology. In 2007, we formed Sendio s.r.o. in the Czech Republic as a wholly-owned subsidiary for continued development of our lighting products, and to design the manufacturing processes required for commercialization and manufacturing. During 2011, we continued our development work on the technology to refine the prototype with the miniaturization of the electronics and improvements to the efficiency of the products and the design and implementation of the processes required to manufacture our lights. During the second quarter of 2010, we submitted our initial light for safety certification to Underwriters Laboratories (UL®) and, in October 2010, we received that certification. Our efforts are presently focused on this initial product, the R30 size light for recessed fixtures. We are currently supporting initial production of this light and are continuing to enhance our manufacturing capabilities through an outsourcing arrangement with Huayi Lighting. In addition, we are currently developing our version of the standard Edisonian A19 screw-in light (and its European equivalent, the A60), the most common general purpose electric light in the world. We submitted this light in June 2011 for safety certification to UL and, in August 2011, we received certification. We are also developing an R40 flood light for the United States commercial market and a smaller R63 light for the European market to be used in currently-installed recessed lighting fixtures. The commercial viability of our ESL technology will largely depend on these results, the ability to manufacture our products on a large scale commercial basis, market acceptance of the products and other factors noted in the "Risk Factors" section of this Annual Report.

During ~~2012~~2013, we focused on initiatives to transition our manufacturing operations to Huayi Lighting from our former facility in the Czech Republic, which in the past has primarily provided us with product testing, engineering development and pilot production of our initial products. These initiatives also included continued efforts to work with Huayi Lighting to refine the manufacturing processes and developing quality control testing necessary for quantity manufacturing. Our progress has been limited, primarily due to lack of adequate funding necessary to execute our business plan. These initiatives are ongoing and, as a result, we had no revenues in 2012. ~~During the year ended December 31, 2011, we recognized revenue of approximately $8,000 from initial sales of our R30 reflector light.~~

18During the year ended December 31, 2011, we recognized revenue of approximately $8,000 from initial sales of our R30 reflector light.

As noted above, our independent registered public accounting firm has issued a “going concern” ~~statement~~modification into its report on our financial statements for the year ended December 31, ~~2012~~2013, stating that we had a net loss and negative cash flows from operations in fiscal ~~2012~~2013 and that we have an accumulated deficit. Accordingly, these conditions raise substantial doubt about our ability to continue as a going concern. Our Consolidated Financial Statements do not include any adjustments that might result from this going-concern uncertainty.

Factors Affecting Financial Results

We had entered into an agreement to purchase the facility presently leased by Sendio in the Czech Republic. During 2011, we used this facility for research and product development and initial production. In February, 2012 Sendio filed a petition for insolvency in the Czech Republic. The premises lease was terminated on March 15, 2012. In addition, our obligation to purchase the facility in Olomouc, Czech Republic was terminated on February 8, 2012 as a result of the insolvency proceedings. In addition, during March 2012, all of the employees of Sendio resigned or were terminated due to the insolvency proceedings of Sendio.

Our anticipated expenditures related to our current operations will primarily depend on personnel costs and additional equipment needs for continued development and manufacturing of our line of lighting products. In addition, we anticipate we will incur substantial costs related to establishing the strategic business relationship with our product manufacturer, as well as for sales, marketing and distribution-related costs, and increased administrative costs. An overall estimate of our capital expenditures is primarily dependent upon the success of our development and the commercial manufacturing results for our lighting products, and as such cannot be presently estimated.

Our anticipated costs in 2013 for the continued development of our line of ESL lighting products cannot be reasonably estimated due to the inherent uncertainty of the research and feasibility of the manufacturing processes. There can be no assurance that this development process will be successful or, if successful, that the technology will find a market and achieve sales that can sustain our operations without additional funding.18

Our anticipated costs in 2014 for the continued development of our line of ESL lighting products cannot be reasonably estimated due to the inherent uncertainty of the research and feasibility of the manufacturing processes. There can be no assurance that this development process will be successful or, if successful, that the technology will find a market and achieve sales that can sustain our operations without additional funding.

Our emphasis on the development of our planned products, the additional manufacturing processes required by our product manufacturer, the distribution, marketing and branding of products and the development of sales channels relating to our lighting products will command management’s primary attention during the next 12 months. It will also comprise the primary use of our financial resources. In 2013, our success will depend on our ability to secure additional funding, reach commercial manufacturing levels for our R30, R40 and A19 lights, generate market awareness and acceptance of our current and planned lighting products, protect our technology through patents and trade secrets, and develop our planned products to meet industry standards. If we are unable for technological, financial, competitive or other reasons to successfully take these steps, our business and operations will be adversely affected.

Results of Operations

The following discussion should be read in conjunction with the information set forth in our Consolidated Financial Statements and notes thereto appearing elsewhere in this Annual Report.

Years ended December 31, ~~2012~~2013 and ~~2011~~2012

Revenues

We had no revenues for the ~~year~~years ended December 31, ~~2012.~~2013 Weand ~~recognized revenues of $8,000 for the year ended December 31, 2011 from initial sales of our R30 lighting product~~2012.

Cost of Revenues

We had no cost of revenues for the year ended December 31, 2012. Cost of revenues is comprised of materials, labor, overhead and freight costs. Total cost of sales was $47,357 for the year ended December 31, 2011. There was no comparable amount for the year ended December 31, 2012.

Research and Development Expenses

For the years ended December 31, ~~2012~~2013 and ~~2011~~2012, we were involved in ~~two~~a ~~projects~~single project to develop and commercialize our proprietary technology in our R30 ~~and~~size ~~A19 sized~~ light ~~bulbs~~bulb. For the year ended December 31, 2013 and 2012, research and development expenses were comprised of technical consulting expenses, product line development fees, material and travel. For the year ended December 31, 2011, research and development expenses were comprised primarily of salary, rent, technical consulting expenses, supplies and travel, and other costs of the research and manufacturing development related operations in the Czech Republic through our former subsidiary, Sendio. Research and development expenses ~~decreased~~increased approximately $3100,~~162,~~000 to $~~547~~647,000 for the year ended December 31, ~~2012~~2013 compared to $3547,~~709,~~000 for the year ended December 31, ~~2011~~2012. The ~~decrease~~increase was primarily ~~related~~due to ~~the~~increases ~~expenses~~in oftechnical ~~Sendio,~~consulting ~~which~~fees ~~ceased~~and ~~operations~~travel induring ~~February 2012~~2013.

General and Administrative Expenses

General and administrative expenses for the years ended December 31, ~~2012~~2013 and ~~2011~~2012 were comprised of share-based compensation expenses, consulting ~~expenses,~~and salaries expenses, professional and legal fees, insurance, travel and general corporate related overhead and office expenses. General and administrative expenses ~~decreased~~increased by approximately $1154,~~791,~~000 to $1,~~538~~692,000 for the year ended December 31, ~~2012~~2013 compared to $31,~~329~~538,000 for the year ended December 31, ~~2011~~2012. Non-cash charges related to share-based compensation expenses ~~decreased~~increased $~~818~~693,000 to $~~416~~1,109,000 relating primarily to stock and stock options issued to directors, ~~officers~~ and ~~our current and our former chief executive~~ officers ~~and directors for the year ended December 31, 2012~~ compared to $1416,~~234,~~000 for the year ended December 31, ~~2011~~2012. ~~The~~This ~~remaining~~increase ~~decrease~~ was ~~primarily~~partially ~~related~~offset toby ~~the~~decreases ~~expenses~~in ofconsulting ~~our former subsidiary~~expenses, professional ~~Sendio,~~fees asand ~~its~~a ~~operations~~lower ~~were~~level ~~discontinued~~of ~~during~~operations ~~the~~in ~~first quarter of 2012~~2013.

Marketing Expenses

Marketing expenses for the years ended December 31, ~~2012~~2013 and ~~2011~~2012 were comprised of consulting fees, ~~share-based compensation expenses~~ and office related expenses. For the year ended December 31, 2013 marketing expenses also included share based compensation expense. Marketing expenses decreased by approximately $~~229~~380,000 to $~~755~~375,000 for the year ended December 31, ~~2012~~2013 compared to $~~984~~755,000 for the year ended December 31, ~~2011~~2012. Non-cash charges related to share based compensation ~~expenses~~were ~~decreased~~ $~~1,000 to $~~112,000 for the year ended December 31, 2012. There ~~compared~~was tono ~~$113,000~~comparable expense for the year ended December 31, ~~2011~~2013. The remaining ~~increase~~decrease was due primarily to decreases in consulting fees related to public relations, channel development and packaging costs for the year ended December 31, ~~2012~~2013.

~~Impairment Loss~~19

We recognized an impairment loss for the year ended December 31, 2011 related to the fixed assets, construction in process and deposit related to the purchase of the facilities of Sendio. The impairment was recognized due to the insolvency proceedings of Sendio filed in February 2012. There was no comparable expense for the year ended December 31, 2012. The details of the impairment loss for the year ended December 31, 2011 were as follows:

	Year Ended December 31,
	2011
Equipment	$	215,283
Construction in process		288,570
Deposit on building purchase		1,308,875
Total impairment loss	$	1,812,728

Inventory Write Down

We recognized an inventory write down for the year ended December 31, 2011 in the amount of $100,000 related to the inventory held by Sendio. The impairment was recognized due to the insolvency proceedings of Sendio filed in February 2012. There was no comparable expense for the year ended December 31, 2012.

Other Income and Expense

Other income and expense for the years ended December 31, ~~2012~~2013 and ~~2011~~2012 was comprised of interest income, interest expense, derivative valuation gain, ~~and~~ loss on extinguishment of debt~~. Interest~~ ~~income~~and ~~was~~gain ~~$19~~on ~~for~~disposal ~~the~~of ~~year~~foreign ~~ended December 31, 2012 compared to $177 for the year ended December 31, 2011~~subsidiary. ~~The decrease was due to lower average cash balances during the year.~~

Interest ~~expense~~income ~~for~~was ~~the year ended December 31, 2012 increased~~ $~~705,000~~19 ~~to $1,310,000 compared to $605,000~~ for the year ended December 31, ~~2011~~2012. ~~Interest~~There ~~expense~~was no amount for the year ended December 31, 2012 and 2011 includes the amortization related to the original issue discount, beneficial conversion feature, warrant allocation and loan costs related to our Convertible Debentures as discussed in note 7 to the Notes to Consolidated Financial Statements2013. InThe ~~addition,~~decrease ~~interest~~was ~~expense~~due ~~includes interest related~~ to ~~our~~lower ~~Bridge~~average ~~Notes~~cash asbalances ~~discussed~~during ~~in Note 8 to~~ the ~~Notes to Consolidated Financial Statements~~year. ~~Interest expense in 2012 also includes interest on the Note Payable as discussed in Note 9. Interest expense in 2011 also includes interest on Sendio’s loan and capital lease obligations.~~

~~Derivative~~Interest ~~valuation~~expense ~~gain~~for ~~results~~the ~~from~~year ~~embedded~~ended ~~derivative~~December ~~financial~~31, ~~instruments~~2013 ~~that~~decreased ~~are~~$118,000 ~~required~~to $1,192,000 compared to be$1,310,000 ~~measured~~for atthe ~~fair~~year ~~value~~ended December 31, 2012. Interest ~~Derivative~~expense ~~valuation~~for ~~gain~~the ~~amounted~~year toended ~~approximately~~December ~~$592~~31,~~000~~ 2013 and ~~$1,498,000~~2012 ~~during~~includes the ~~years~~amortization ~~ended~~related ~~December~~to 31the original issue discount, ~~2012~~beneficial ~~and~~conversion ~~2011~~feature, warrant allocation and loan costs related to our Convertible Debentures as discussed in Note 6 to the ~~derivative~~Notes ~~warrant~~to ~~liability~~Consolidated Financial Statements. In addition, interest expense includes interest related to our Bridge Notes as discussed in Note 107 to the Notes to Consolidated Financial Statements. Interest expense in 2012 also includes interest on the Note Payable as discussed in Note 8. The decrease primarily due to the decrease in non-cash amortization of the original issue discount, beneficial conversion feature, warrant allocation and loan costs related to our Convertible Debentures, which were fully amortized by June 30, 2013. This was partially offset by increases in cash and penalty interest expense related to the defaulted Convertible Debentures as discussed in Note 6.

~~The~~Derivative ~~changes~~valuation ingain ~~the~~results ~~fair~~from ~~value~~embedded ofderivative ~~our~~financial ~~derivatives~~instruments that are ~~significantly~~required ~~influenced~~to bybe ~~changes~~measured inat ~~our~~fair ~~trading~~value. ~~stock~~Derivative ~~price~~valuation ~~and~~gain ~~changes~~amounted into ~~interest~~approximately ~~rates~~$592,000 infor the ~~public~~year ~~markets.~~ended WeDecember ~~value~~31, ~~our~~2012. ~~derivative~~There ~~warrant~~was ~~liability~~no ~~using~~comparable expense for the ~~Black-Scholes~~year ~~option~~ended ~~valuation~~December ~~method~~31, 2013.

Liquidity and Capital Resources

We had cash of $~~328~~92,~~188~~795 and short-term debt of $4,~~526~~005,~~750~~975, of which $1,452,975 is in default as of December 31, ~~2012~~2013.

OnThrough ~~January~~March 2528, ~~2013,~~2014 we ~~completed~~have raised a ~~private~~total ~~placement to accredited investors~~ of ~~105~~$150,000 ~~restricted~~in ~~shares~~a ofprivate ~~common~~placement ~~stock,~~to accredited investors at a purchase price of $1.00 per share,. The ~~for~~investors ~~gross~~were ~~proceeds~~issued ~~of $105~~150,000~~. As~~ ~~part~~shares of ~~the~~restricted ~~private~~common ~~placement,~~stock ~~the~~and ~~investors were issued three~~two-year warrants to purchase ~~105~~150,000 shares of common stock, at an exercise price of $1.5025 per share.

OnWe ~~February~~must ~~26,~~obtain ~~2013,~~additional ~~the~~financing ~~three~~in ~~remaining~~2014 ~~holders~~to offund ~~the~~our ~~convertible~~operations, ~~bridge~~research ~~loans~~and asproduct ~~discussed~~development inand ~~Note~~manufacturing 8activities, tothrough ~~the~~one ~~Consolidated~~or ~~Financial~~more ~~Statements~~debt ~~converted~~or ~~the~~equity ~~balance~~financings. Our ofefforts anto ~~aggregate~~raise ofsufficient ~~$368,162~~capital ofmay ~~their~~not ~~loans~~be ~~(including $68~~successful,~~162~~ ~~of loan fees~~ and ~~accrued~~even ~~interest~~if aswe ofare ~~that~~able ~~date)~~to ~~into~~obtain ~~368~~additional financing,~~162~~ ~~shares~~the terms of ~~common~~any ~~stock~~such atfinancing amay ~~conversion~~be ~~price~~unfavorable ofto ~~$1.00~~us ~~per~~and ~~share. In~~may ~~addition,~~be wehighly ~~issued~~dilutive ~~three-year warrants~~ to ~~purchase~~existing ~~368,162~~stockholders. ~~shares~~No ofassurance ~~common~~can ~~stock~~be atgiven anthat ~~exercise~~additional ~~price~~financing ofwill ~~$1.50~~be ~~per~~available ~~share~~on ~~and~~terms ~~three-year~~acceptable ~~warrants~~ to ~~purchase 98~~us,~~571~~ ~~shares~~if ~~of common stock~~ at ~~an exercise price of $11~~all.~~00 per share.~~

WeIf ~~must~~we are unable to obtain ~~additional~~sufficient ~~financing~~cash into ~~2013~~continue to fund ~~our~~ operations, ~~research~~or ~~and~~if ~~product~~we ~~development~~are ~~and~~unable ~~manufacturing~~to ~~activities~~locate a strategic partner, ~~through~~we ~~one~~may orbe ~~more~~forced ~~debt~~to curtail or ~~equity~~cease ~~financings~~operations. ~~Our~~Any ~~efforts~~inability to ~~raise~~obtain ~~sufficient~~additional ~~capital~~cash ~~may~~as ~~not~~needed bewould ~~successful,~~have ~~and~~a ~~even~~material ifadverse weeffect ~~are~~on ~~able~~our tofinancial ~~obtain~~position, ~~additional~~results ~~financing,~~of ~~the~~operations ~~terms~~and ofour ~~any~~ability ~~such~~to ~~financing~~continue ~~may~~in beexistence. Our ~~unfavorable~~independent toregistered uspublic ~~and~~accounting ~~may~~firm beadded ~~highly~~an ~~dilutive~~explanatory paragraph to ~~existing~~its ~~stockholders.~~opinion Noon ~~assurance~~our ~~can~~2013 befinancial ~~given~~statements stating that ~~additional~~there ~~financing~~was ~~will~~substantial bedoubt ~~available~~about onour ~~terms~~ability ~~acceptable~~ to ~~us,~~continue ifas ata ~~all~~going concern.

If we are unable to obtain sufficient cash to continue to fund operations or if we are unable to locate a strategic partner, we may be forced to curtail or cease operations. Any inability to obtain additional cash as needed would have a material adverse effect on our financial position, results of operations and our ability to continue in existence. Our independent registered public accounting firm added an explanatory paragraph to its opinion on our 2012 financial statements stating that there was substantial doubt about our ability to continue as a going concern.

Contractual Obligations

~~The~~We ~~following~~had isno ~~a summary of our~~ contractual ~~payment~~ obligations for operating leases as of December 31, ~~2012:~~2013. We entered into a two year lease obligation effective February 1, 2014. Our lease obligations are $55,000, $60,000 and $5,000 for the years ended December 31, 2014, 2015 and 2016, respectively.

Contractual Obligations		Total				Less than 1 year				1-3 years				3-5 years				More than 5 years
New York Office Lease		$	12,210			$	12,210				--				--				--

Impact of Inflation

We expect to be able to pass inflationary increases for raw materials and other costs on to our customers through price increases, as required, and do not expect inflation to be a significant factor in our business.

Seasonality

Although our operating history is limited, we do not believe our products are seasonal.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Critical Accounting Estimates and Policies

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the use of estimates that affect the reported amounts of assets, liabilities and expenses. We evaluate our estimates on an ongoing basis and base our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances at that time. The discussion below is intended as a brief discussion of some of the judgments and uncertainties that can impact the application of these policies and the dollar amounts reported on our financial statements. Actual results may differ from these estimates under different assumptions or conditions. We believe that the following critical accounting policies affect our more significant estimates used in the preparation of our financial statements and is important to the understanding of our results of operations. This is not a complete list of all of our accounting policies, and there may be other accounting policies that are significant to your understanding of our company. For a detailed discussion on the application of these and our other accounting policies, see Note 2 to the Notes to Consolidated Financial Statements.

Share-Based Payments

Fair Value Measurements

ASC 820 “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This hierarchy prioritizes the inputs into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. Significant fair value measurements resulted from our discount and beneficial conversion feature and warrant allocation on our convertible debentures and our share-based payment arrangements.

2221

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in the price of a financial instrument. The value of a financial instrument may change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes.

Under our manufacturing agreement with Huayi Lighting Company Ltd., we are invoiced in U.S. dollars. However, we may be subject to the risk of fluctuations in raw material prices in the future, since our arrangement with Huayi Lighting provides that increases and decreases in the prices of such raw materials obtained from local China-based vendors are passed through to us in the form of adjusted final finished good prices charged by Huayi Lighting.

We have not used any forward contracts or currency borrowings to hedge our exposure to foreign currency exchange risk, but we may consider the use of such contracts in the future.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item is set forth in our Consolidated Financial Statements and notes thereto beginning at page F-1 of this Annual Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH THE ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Control and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in our filings under the Securities Exchange Act of 1934 is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, as of the end of the fiscal year covered by this Annual Report, we have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at December 31, ~~2012~~2013.

There have been no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the fourth quarter of fiscal ~~2012~~2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our internal control over financial reporting as of December 31, ~~2012~~2013, based on the framework in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework, management concluded that our internal control over financial reporting was effective as of December 31, ~~2012~~2013.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.

/S/ William B. Smith		/S/ Matthew J. DeVries
William B. Smith Chief Executive Officer		Matthew J. DeVries Chief Financial Officer

THE FOREGOING MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING SHALL NOT BE DEEMED TO BE “FILED” WITH THE SEC, NOR SHALL SUCH INFORMATION BE INCORPORATED BY REFERENCE INTO ANY PAST OR FUTURE FILING UNDER THE SECURITIES ACT OR THE EXCHANGE ACT, EXCEPT TO THE EXTENT WE SPECIFICALLY INCORPORATE IT BY REFERENCE INTO SUCH FILING.

ITEM 9B. OTHER INFORMATION

None

2423

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Executive Officers and Directors

The following table sets forth the names and ages of our executive officers, directors and key personnel, and their positions with us, as of March 20, ~~2013~~2014:

Name	Age	Title
William B. Smith	4445	Chairman of the Board of Directors and Chief Executive Officer
Matthew J. DeVries	5051	Chief Financial Officer
John J. Boyle III	65	Director
Charles Hunt, Ph.D.	60	Director
Paul D. Fletcher	53	Director
John E. Rehfeld	73	Director
Charles Hunt, Ph.D.	59	Director
W. Duncan Troy	54	Director
John E. Rehfeld	72	Director
Mark W. Weber	56	Director
W. Duncan Troy	53	Director
Joshua Hauser	68	Director
Mark W. Weber	55	Director
Juan Carlos Blacker	40	Vice President, Business Development - Energy Efficient Markets

The principal occupations for the past five years (and, in some instances, for prior years) of each of our executive officers and directors are as follows:

William B. Smith has served as our Chief Executive Officer since June, 2012. He was elected to our board of directors in November 2010 and elected chairman in January 2011. Mr. Smith is the Founder and has been the Chief Executive Officer of Smith Asset Management, Inc. since 1997. Mr. Smith is also the President and Chief Executive Officer since 2004 of SAM Advisors, LLC, a money management firm spun off from Smith Asset Management, Inc., specializing in distressed public debt and equities trading at discounts to intrinsic value, as well as special situation investments. In addition, Mr. Smith is the founder and has been the Managing Member of SAM Capital Partners, LLC, the General Partner of SAM Special Opportunities Fund, LP (our largest stockholder) since 2009.

As the Chairman and our company’s largest stockholder (through entities controlled by him), Mr. Smith leads the board and guides the company. Mr. Smith brings a deep background in technology companies through his portfolio investments, and extensive experience in mergers and acquisitions and capital markets transactions.

Matthew J. DeVries has served as our Chief Financial Officer since October 2006. Mr. DeVries has been an independent financial consultant since 2001, providing public and privately-held corporations financial assistance and has coordinated audits and supervised the preparation and filing of public disclosure documents for corporations in his consulting practice.

Charles Hunt, Ph.D. was elected to our board of directors in October 2006. Dr. Hunt holds B.S.E.E. and M.S.E.E. degrees from the University of Utah and a Ph.D. in electrical engineering from Cornell University. He has been at the University of California at Davis since 1986, where he is presently a Professor with multiple appointments and a visiting Professor of Electronics in the Faculty of Physics of the University of Barcelona. Dr. Hunt is a Senior Member of the Institute of Electrical and Electronics Engineers, and is author or co-author of more than 120 refereed publications and eight books, and holds 12 patents. From 1997 to 2004, he served as editor of the journal, Solid-State Electronics.

John J. Boyle III was elected to our board of directors in September 2011. Mr. Boyle was the President and Chief Executive Officer and a member of the board of directors of Arbor Networks Inc., a network security company, from September 2005 to January 2010. Mr. Boyle was responsible for directing the progression of Arbor Networks into a well-regarded thought-leader on network security issues, and drove the company’s acquisition and integration of Ellacoya Networks, formerly a leading provider of deep packet inspection solutions. Mr. Boyle was a director from July 1999 to 2004 and lead director from 2004 to 2007 of eFunds Corp., a payment services company. Mr. Boyle was also the Chief Executive Officer of Saville Systems, Inc., a provider of customer care and billing solutions to the telecommunications and energy industries, from September 1994 and became Chairman of the Board in 1998 until the company was sold to ADC Telecommunications, Inc. in December 1999. He remained on the board of ADC Telecommunications, Inc. until it was sold in December 2010. Mr. Boyle received a B.S. degree in business administration from Northeastern University.

Mr. Boyle’s more than 20 years of high-tech experience, including scaling venture capital-funded start-ups through exits including initial public offerings and mergers and acquisitions, makes him well qualified as a member of our board.

Paul D. Fletcher was elected to our board of directors in September 2011. He is currently the Chief Financial Officer at Presidio, Inc., a privately-held high-end IT integration and managed networks services company, since August 2007. Previously, he served as the Senior Vice President and Chief Financial Officer of Trex Company, from July 2003 to August 2007. He was Vice President of Finance of that company from October 2001 through July 2003, and of TREX Company, LLC from October 2001 through December 2002. From 2000 to 2001, Mr. Fletcher served as Vice President and Chief Financial Officer for AMX Corporation, an advanced control system technology company. From 1996 to 2000, he served as Vice President and Treasurer for Excel Communications Inc., a telecommunications company. From 1987 to 1996, he served as Senior Vice President and Treasurer for Lomas Financial Corporation, a financial services company. Mr. Fletcher received his B.A. degree in economics and management from Albion College and an M.B.A. degree in finance and management policy from Northwestern University’s Kellogg School of Management.

Mr. Fletcher demonstrates extensive knowledge of complex accounting, financial reporting and operational issues highly relevant to our business, making him well qualified as a member of our board.

Dr. Hunt brings 25 years of scientific knowledge in technology product development in the electronic and electrical industries, making his insights invaluable to the board.

John E. Rehfeld was elected to our board of directors in September 2011. Mr. Rehfeld is currently on the board of directors of Lantronix, Inc., a provider of secure communication technologies (since May 2010), Local.com Corporation, a local search engine provider (since 2005), and Enkeboll Design, a privately-held company (since January 2006). Mr. Rehfeld was previously a director of ADC Telecommunications, Inc., a provider of network infrastructure solutions (from September 2004 to December 2010, when it was sold), Overtone, a privately-held company that monitors company-hosted online forums and feedback platforms (from 2002 to April 2011, when it was sold), and Primal Solutions, Inc., a managed software solutions provider (from December 2008 to June 2009). Mr. Rehfeld most recently served as Chief Executive Officer of Spruce Technologies, Inc., a DVD authoring software company, during 2001. From 1997 to 2001, Mr. Rehfeld served as Chairman and Chief Executive Officer of ProShot Golf, Inc. He also served as President and Chief Executive Officer of Proxima Corporation from 1995 to 1997, and as President and Chief Executive Officer of ETAK, Inc. from 1993 to 1995. Mr. Rehfeld is the Chairman Emeritus of the Forum of Corporate Directors in Orange County, California.

Mr. Rehfeld’s over 30 years of executive experience in high growth industries, including prior experience as a Chief Executive Officer of a number of companies; prior and current experience serving as a director of a number of public and private companies, and a distinguished educational background, including an M.B.A. degree from Harvard University and a B.S. degree in chemical engineering from the University of Minnesota, as well as his current positions as adjunct professor of marketing and strategy for the Executive M.B.A. Programs at Pepperdine University (since 1998) and the University of San Diego (since 2010), provide him with the skills and qualifications to serve on our board of directors.

Duncan Troy was elected to our board of directors in February 2004, and served as our Chairman of the Board from May 2004 to July 2008, and from July 2010 to January 2011. Mr. Troy was a former Telegen advisory board member and is a current director of the following U.K. based companies: Private Equity III Limited, a U.K. investment vehicle (from September 1996 to date) and SMS Lottome Limited, a U.K. cell phone lottery and gaming company (from March 2004 to date).

Mr. Troy’s nearly 30 years of service as a board member and investor in many early-stage and growth companies make him well qualified as a member of our board.

Mark W. Weber was elected to our board of directors in June 2005. Mr. Weber has been a marketing consultant, strategic planner and senior business advisor to financial services companies, technology companies and emerging growth companies since 1988. Mr. Weber has been involved in raising private capital and launching start up, emerging growth technology companies and new banks over the past 20 years. Since 1988, he has been the President of Weber Marketing Group, the 12th largest marketing agency in Washington State and a national provider of marketing consulting and branding services to financial services and technology companies across the United States. Mr. Weber was a founder and board member of Pacifica Bank from 1998 to 2005. Pacifica Bank was a SEC-registered business bank sold in 2005 to United Bank California. Mr. Weber also served as chairman of the board’s compensation committee at Pacifica from 2002 to 2005. Mr. Weber served as an advisory board member of several technology and emerging growth companies between 1990 and 2001. He has been on the Board of Trustees of the Noemi Fund, part of Agros International, since 2003.

Mr. Weber’s experience in launching, marketing and branding technology and emerging growth companies make him well qualified to be a member of our board.

~~All~~Joshua ~~directors~~Hauser ~~hold~~was ~~office~~elected ~~until~~to ~~the~~our ~~next~~board ~~annual~~of ~~meeting~~directors ofin ~~stockholders~~July, ~~and~~2013. ~~the~~Mr. ~~election~~Hauser ~~and~~has ~~qualification~~been a director of ~~their~~Transistor ~~successors~~Devices, Inc. ~~Officers~~, ~~are~~a ~~elected~~privately ~~annually~~held bycompany based in New Jersey engaged in the ~~board~~design and manufacture of ~~directors~~power supplies for commercial, industrial and ~~serve~~military atapplications ~~the~~since ~~discretion~~1999; he has served as Chairman of the ~~board~~Board of Transistor Devices, Inc. ~~There~~ ~~are~~since no2007. In ~~family~~addition, ~~relationships~~Mr. ~~among~~Hauser ~~our~~is ~~directors~~a Management Consultant with JKD Consultants, Inc. since 1999. He has also served as President and ~~executive~~a ~~officers~~Director of Odyne Corporation from 2004 to 2009. As Odyne was a publicly traded (OTC) clean technology company manufacturing plug-in hybrid electric drive systems for heavy vehicles. Mr. Hauser has also served as a director on several publicly traded companies over the course of ~~March~~his 20career, ~~2013~~including Unitech, ~~there~~plc ~~are~~(London), noVeeco ~~proceedings~~Instruments toInc. ~~which~~(NYSE) ~~any~~and ofNemic ~~our~~Lambda ~~directors,~~KK ~~executive~~(Tokyo). His ~~officers~~previous management roles included President Siebe Power Controls (1996-1999), ~~affiliates~~Managing orDirector ~~stockholders~~Power isSupplies Division Unitech plc (1989-1996) and Executive Vice President Veeco Instruments (1987-1989). Mr. Hauser has a ~~party~~BSEE ~~adverse~~and toMSEE usfrom Columbia University School of Engineering.

~~Key~~Mr. ~~Personnel~~Hauser’s experience with electronics manufacturing, clean technology and as a current and former director make him well qualified to be a member of our board.

Juan Carlos Blacker joined our company in September 2011 as Vice President, Business Development - Energy Efficient Markets and serves as a consultant to us. Mr. Blacker was previously the Program and Product Manager at Portland Energy Conservation, Inc. (PECI), an energy resource management company, from July 2007 to August 2011. Mr. Blacker leads the company’s efforts in participating in energy efficiency programs, and in complying with governmental policies and standards, throughout the United States and Canada.25

All directors hold office until the next annual meeting of stockholders and the election and qualification of their successors. Officers are elected annually by the board of directors and serve at the discretion of the board. There are no family relationships among our directors and executive officers. As of March 20, 2014, there are no proceedings to which any of our directors, executive officers, affiliates or stockholders is a party adverse to us.

Board of Directors and Corporate Governance

Our board of directors is responsible for establishing broad corporate policies and for overseeing our overall management. In addition to considering various matters which require board approval, the board provides advice and counsel to, and ultimately monitors the performance of, our senior management.

We established a Compensation Committee in 2008, and an Audit Committee and Nominations and Corporate Governance Committee in September 2011. The charters for the Audit Committee, Compensation Committee and Nominations and Corporate Governance Committee are available at our website, www.vu1.com. Five members of our board of directors, ~~John~~Charles ~~J. Boyle III~~Hunt, ~~Paul~~Joshua ~~Fletcher~~Hauser, John E. Rehfeld, Duncan Troy and Mark W. Weber, are considered “independent” within the meaning of the listing rules of the Nasdaq Stock Market. ~~Additionally, Charles Hunt, Ph.D., who served as a paid consultant in 2008, became an independent director in 2012.~~

27The board, its committees and our management strive to perform and fulfill their respective duties and obligations in a responsible and ethical manner. The board and the Audit, Compensation and Nominations and Corporate Governance Committees each perform annual self evaluations. We have adopted a Code of Ethics that applies to our Chief Executive Officer and Chief Financial Officer. Upon request, we will provide to any person without charge a copy of our Code of Ethics. Any such request should be made to Matthew DeVries, Chief Financial Officer, Vu1 Corporation, 1001 Camelia Ave Berkeley, CA 94710.

The board, its committees and our management strive to perform and fulfill their respective duties and obligations in a responsible and ethical manner. The board and the Audit, Compensation and Nominations and Corporate Governance Committees each perform annual self evaluations. We have adopted a Code of Ethics that applies to our Chief Executive Officer and Chief Financial Officer. Upon request, we will provide to any person without charge a copy of our Code of Ethics. Any such request should be made to Matthew DeVries, Chief Financial Officer, Vu1 Corporation, 1 Liberty Plaza, 23rd Floor, New York, NY 10006.

Committees of the Board

Audit Committee. The board has an Audit Committee comprised of three non-employee directors, ~~Paul~~John DE. ~~Fletcher~~Rehfeld (chairman), ~~Duncan~~Joshua ~~Troy~~Hauser and Mark W. Weber. Each member of the Audit Committee is independent as defined under Nasdaq’s listing rules. The board of directors has determined that Mr. ~~Fletcher~~Rehfeld qualifies as an “audit committee financial expert.” The Audit Committee functions pursuant to a written charter, under which the committee has such powers as may be assigned to it by the board from time to time. The Audit Committee was established in September 2011. Until the formation of the Audit Committee, the entire board of directors performed the functions of the Audit Committee. The Audit Committee is currently charged with, among other things:

· recommending to the board of directors the engagement or discharge of our independent public accountants, including pre-approving all audit and non-audit related services; · the appointment, compensation, retention and oversight of the work of the independent auditor engaged by us for the purpose of preparing or issuing an audit report or performing other audit review or attest services for us; · establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters; · approving the scope of the financial audit; · requiring the rotation of the lead audit partner; · consulting regarding the completeness of our financial statements; · reviewing changes in accounting principles; · reviewing the audit plan and results of the auditing engagement with our independent auditors and with our officers; · reviewing with our officers, the scope and nature and adequacy of our internal accounting and other internal controls over financial reporting and disclosure controls and procedures; · reviewing the adequacy of the Audit Committee Charter at least annually; · meeting with our Internal Auditor on a regular basis; · performing an internal evaluation of the Audit Committee on an annual basis; and · reporting to the board of directors on the Audit Committee's activities, conclusions and recommendations.

Compensation Committee. The board has a Compensation Committee comprised of two non-employee directors, John E. Rehfeld (chairman) and Paul Fletcher. Each member of the Compensation Committee is independent as defined under Nasdaq’s listing rules. The Compensation Committee functions pursuant to a written charter, under which the committee has such powers as may be assigned to it by the board from time to time. The Compensation Committee was established in 2008. The Compensation Committee is currently charged with, among other things, assisting the board in:26

28· requiring the rotation of the lead audit partner; · consulting regarding the completeness of our financial statements; · reviewing changes in accounting principles; · reviewing the audit plan and results of the auditing engagement with our independent auditors and with our officers; · reviewing with our officers, the scope and nature and adequacy of our internal accounting and other internal controls over financial reporting and disclosure controls and procedures; · reviewing the adequacy of the Audit Committee Charter at least annually; · meeting with our Internal Auditor on a regular basis; · performing an internal evaluation of the Audit Committee on an annual basis; and · reporting to the board of directors on the Audit Committee's activities, conclusions and recommendations.

·Compensation ~~approving~~Committee. The ~~and~~board ~~evaluating~~has ~~the~~a ~~compensation~~Compensation ofCommittee ~~directors~~comprised ~~and executive officers; · establishing strategies and compensation policies and programs for employees to provide incentives for delivery~~ of ~~value~~two tonon-employee ~~our~~directors, ~~stockholders;~~Duncan ·Troy ~~establishing~~(chairman) ~~policies to hire~~ and ~~retain~~Mark ~~senior~~Weber. Each ~~executives,~~member ~~with the objective~~ of ~~aligning~~ the ~~compensation~~Compensation ofCommittee ~~senior~~is ~~management~~independent ~~with our business and the interests of our stockholders; · together with management, surveying the amount and types of executive compensation paid by comparable companies, and engaging consultants~~ as ~~necessary~~defined tounder ~~assist~~Nasdaq’s ~~them;~~listing ·rules. The ~~periodically~~Compensation ~~reviewing~~Committee ~~corporate~~functions ~~goals~~pursuant ~~and objectives relevant~~ to ~~executive~~a ~~compensation~~written ~~and~~charter, ~~making~~under ~~recommendations~~which to the ~~board~~committee ~~for~~has ~~changes;~~such ·powers ~~assisting~~as ~~management~~may inbe ~~evaluating~~assigned ~~each executive officer's performance in light of corporate goals and objectives, and recommending~~ to ~~the~~it ~~board (for approval~~ by the independent directors) the executive officers' compensation levels based on this evaluation; · overseeing our stock option plan or other stock-based plans with respect to our executive officers and employee board ~~members,~~from ~~who~~time ~~are subject~~ to ~~the~~time. The ~~short-swing~~Compensation ~~profit~~Committee ~~restrictions~~was ofestablished ~~Section~~in 162008. ofThe ~~the~~Compensation ~~Securities~~Committee ~~Exchange~~is ~~Act~~currently ofcharged ~~1934, as amended; · reviewing the overall performance of our employee benefit plans and making recommendations to the board regarding incentive-compensation plans and equity-based plans; · together~~ with ~~the Nominations and Corporate Governance Committee~~, ~~reviewing~~among and making recommendations to the independent directors of the board regarding the form and amount of director compensation; · ensuring that our compensation policies meet or exceed all legal and regulatory requirements and any other ~~requirements~~things, ~~imposed~~assisting ~~on us by~~ the board; ~~and · producing an annual report on executive compensation for inclusion~~ in ~~our information statement.~~:

·	approving and evaluating the compensation of directors and executive officers;

·	establishing strategies and compensation policies and programs for employees to provide incentives for delivery of value to our stockholders;

·	establishing policies to hire and retain senior executives, with the objective of aligning the compensation of senior management with our business and the interests of our stockholders;

·	together with management, surveying the amount and types of executive compensation paid by comparable companies, and engaging consultants as necessary to assist them;

·	periodically reviewing corporate goals and objectives relevant to executive compensation and making recommendations to the board for changes;

·	assisting management in evaluating each executive officer's performance in light of corporate goals and objectives, and recommending to the board (for approval by the independent directors) the executive officers' compensation levels based on this evaluation;

·	overseeing our stock option plan or other stock-based plans with respect to our executive officers and employee board members, who are subject to the short-swing profit restrictions of Section 16 of the Securities Exchange Act of 1934, as amended;

·	reviewing the overall performance of our employee benefit plans and making recommendations to the board regarding incentive-compensation plans and equity-based plans;

·	together with the Nominations and Corporate Governance Committee, reviewing and making recommendations to the independent directors of the board regarding the form and amount of director compensation;

·	ensuring that our compensation policies meet or exceed all legal and regulatory requirements and any other requirements imposed on us by the board; and

·	producing an annual report on executive compensation for inclusion in our information statement.

In general, the Compensation Committee formulates and recommends compensation policies for board approval, oversees and implements these board-approved policies, and keeps the board apprised of its activities on a regular basis. In addition, the Compensation Committee together with the Nominations and Corporate Governance Committee, develops criteria to assist the board's assessment of the Chief Executive Officer's leadership of our company.

Nominations and Corporate Governance Committee. The board has a Nominations and Corporate Governance Committee comprised of two non-employee directors, Mark W. Weber (chairman) and ~~John~~Duncan JTroy. ~~Boyle III.~~ Each member of the Nominations and Corporate Governance Committee is independent as defined under Nasdaq’s listing rules. The Nominations and Corporate Governance Committee functions pursuant to a written charter, under which the committee has such powers as may be assigned to it by the board from time to time. The Nominations and Corporate Governance Committee was established in September 2011. Until the formation of the Nominations and Corporate Governance Committee, the entire board of directors performed the functions of the Nominations and Corporate Governance Committee. The Nominations and Corporate Governance Committee is currently charged with, among other things, assisting the board in:

29· identifying individuals qualified to become board members and recommending that the board select a group of director nominees for each next annual meeting of our stockholders; · ensuring that the Audit, Compensation and Nominations and Corporate Governance Committees of the board have the benefit of qualified and experienced "independent" directors; · developing and recommending to the board a set of effective corporate governance policies and procedures applicable to us, and reviewing and reassessing the adequacy of such guidelines annually and recommending to the board any changes deemed appropriate; · periodically reviewing the charters of all board committees and recommending to the committees and board any changes deemed appropriate; · developing policies on the size and composition of the board; · conducting annual evaluations of the performance of the board, committees of the board and individual directors; · reviewing conflicts of interest and the independence status of directors; · together with the Compensation Committee, reviewing and making recommendations to the independent directors of the board regarding the form and amount of director compensation; · reviewing the structure of our senior staffing and management succession plans with the Chief Executive Officer;

· identifying individuals qualified to become board members and recommending that the board select a group of director nominees for each next annual meeting of our stockholders; · ensuring that the Audit, Compensation and Nominations and Corporate Governance Committees of the board have the benefit of qualified and experienced "independent" directors; · developing and recommending to the board a set of effective corporate governance policies and procedures applicable to us, and reviewing and reassessing the adequacy of such guidelines annually and recommending to the board any changes deemed appropriate; · periodically reviewing the charters of all board committees and recommending to the committees and board any changes deemed appropriate; · developing policies on the size and composition of the board; · conducting annual evaluations of the performance of the board, committees of the board and individual directors; · reviewing conflicts of interest and the independence status of directors; · together with the Compensation Committee, reviewing and making recommendations to the independent directors of the board regarding the form and amount of director compensation; · reviewing the structure of our senior staffing and management succession plans with the Chief Executive Officer; · together with the Compensation Committee, developing criteria to assist the board's assessment of the Chief Executive Officer's leadership of our company; and · generally advising the board (as a whole) on corporate governance matters.28

·	together with the Compensation Committee, developing criteria to assist the board's assessment of the Chief Executive Officer's leadership of our company; and

·	generally advising the board (as a whole) on corporate governance matters.

Committee Interlocks and Insider Participation

No member of our board of directors is an employee or consultant for us or our subsidiaries, except for William B. Smith.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers and directors and persons who own more than 10% of our common stock to file reports of ownership on Form 3 and changes in ownership on Form 4 or 5 with the SEC. Such officers, directors, and 10% stockholders are also required by SEC rules to furnish us with copies of all Section 16(a) reports they file.

We believe that our officers, directors, and 10% stockholders complied with their Section 16(a) filing obligations during the year ended December 31, ~~2012~~2013, except for the following: William B. Smith did not report a grant of options and W. Duncan Troy, Charles Hunt, Ph.D., William B. Smith, ~~Paul D. Fletcher,~~ John E. Rehfeld, ~~John~~Joshua ~~J. Boyle III~~Hauser, Matthew DeVries and Mark W. Weber did not file a Form 4 to report an issuance of restricted stock.

Code of Ethics

On March 29, 2011, we adopted a Code of Business Conduct and Ethics applicable to our principal executive officer, principal financial and accounting officer or persons performing similar functions. The Code of Ethics and Business Conduct codifies the business and ethical principles that govern all aspects of our business.

ITEM 11. EXECUTIVE COMPENSATION

The following table provides information about the compensation paid to, earned or received during the last two fiscal years ended December 31, ~~2012~~2013 and ~~2011~~2012 by (a) all persons serving as principal executive officer, and (b) our two other most highly compensated executive officers whose total compensation exceeded $100,000 in fiscal ~~2012~~2013, as follows (collectively, the “Named Executive Officers”):

· William B. Smith, our Chief Executive Officer (principal executive officer); · Scott C. Blackstone, our former Chief Executive Officer (principal executive officer); · ~~Philip G. Styles, our former Chief Executive Officer (principal executive officer); ·~~ Matthew DeVries, Chief Financial Officer (principal financial officer).

Summary Compensation Table

	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Name and Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
William B. Smith	2012		166,900		-		-		-		-		-		-		166,900
William B. Smith Chief Executive Officer,	2013		240,000		-		-		383,726		-		-		-		623,726
Chief Executive Officer, Principal Executive Officer (1)	2011		-		-		-		61,625		-		-		-		61,625
Principal Executive Officer (1)	2012		166,900		-		-		-		-		-		-		166,900
Scott C. Blackstone	2012		106,481		-		-		88,815		-		-		-		195,296
Scott C. Blackstone Former Chief	2013		-		-		-		-		-		-		-		-
Chief Executive Officer, Principal Executive Officer (2)	2011		167,731		-		-		262,656		-		-		-		430,387
Executive Officer, Principal Executive Officer (2)	2012		106,481		-		-		88,815		-		-		-		195,296
Philip Styles Former	2012		-		-		-		-		-		-		-		-
Matthew DeVries Chief Financial	2013		180,000		-		87,619		-		-		-		-		267,619
Chief Executive Officer, Principal Executive Officer (3)	2011		138,122		-		-		288,910		-		-		10,639		437,671
Officer (3)	2012		146,950		-		16,693		-		-		-		-		163,643
Matthew DeVries	2012		146,950		-		16,693		-		-		-		-		163,643
Chief Financial Officer (4)	2011		118,750		-		-		79,907		-		-		-		198,657

________________

(1)	On June 11, 2012, the board of directors appointed Mr. Smith as our Chief Executive Officer. AFor the years ended December 31, 2013 and 2012, a total of $75,000 and $62,500 of his salary ~~for 2012~~ was converted into 48,842 and 56,208 shares of our common stock based on a the closing market prices of our common stock on the last business day of each month beginning in August, 2012. The ~~2011~~2013 option awards amount is comprised of the fair value of athe ~~fully~~ vested portion of a ten-year option to purchase 12250,~~500~~000 shares of common stock at an exercise price of $101.4070 per share awarded on ~~August~~February 2220, ~~2011~~2013 with a fair value of $61410,~~625~~540. This amount does not reflect the actual amounts that may be realized. The fair values of the options were computed using the Black-Scholes option valuation method with the assumptions as detailed in Note 1110 to the Notes to Consolidated Financial Statements.
(2)	On April 27, 2011, the board of directors appointed Mr. Blackstone as our Chief Executive Officer and entered into a three-year employment agreement as of that date. The 2012 ~~and 2011~~ option awards amount is comprised of the fair value of the vested portion of a ten-year option to purchase 110,807 shares of common stock at an exercise price of $7.82 per share awarded on April 27, 2011 with a fair value of $616,084, of which $~~88,815 and $~~239,406 was recognized in the ~~years~~year ended December 31, 2012 ~~and 2011, respectively~~. ~~The~~This ~~2011~~ amount ~~also~~does includes the fair value of a fully vested ten-year option to purchase 25,000 shares of common stock at an exercise price of $7.80 per share awarded on August 22, 2011 with a fair value of $123,250. These amounts do not reflect the actual amounts that may be realized. The fair values of the options were computed using the Black-Scholes option valuation method with the assumptions as detailed in Note 1110 to the Notes to Consolidated Financial Statements. Mr. Blackstone resigned as an our Chief Executive Officer on June 6, 2012.
(3)	The 2013 stock awards amount is comprised of the fair value of 20,000 shares of restricted common stock awarded on February 20, 2013 at a price of $1.61 per share and the vested portion of a grant of 50,000 shares of restricted stock awarded on August 26, 2013 at a price of $1.20 per share. The fair value of the awards was $32,200 and $60,000, respectively of which $32,200 and $27,312 was recognized in 2013. The fair values were based on the closing market price of our common stock on the date of grant. The 2013 and 2012 stock awards amount is comprised of the fair value of the vested portion of a grant of 20,000 shares of restricted stock award on August 17, 2012 at a price of $2.24 per share based on the closing market price of that date. The fair value of the award was $44,800, of which $28,107 and $16,693 was recognized in 2013 and 2012, respectively. The 2013 option awards amount is comprised of the fair value of a fully vested ten-year option to purchase 10,100 shares of common stock at an exercise price of $1.61 per share awarded on February 20, 2013 with a fair value of $16,260. This amount does not reflect the actual amounts that may be realized. The fair values of the options were computed using the Black-Scholes option valuation method with the assumptions as detailed in Note 10 to the Notes to Consolidated Financial Statements.

The following table summarizes equity awards outstanding at December 31, 2013 for each of the executive officers named in the Summary Compensation Table above:

(3)

On October 4, 2010, the board of directors appointed Mr. Styles as our Chief Executive Officer and entered into a one-year employment agreement as of that date. A total of $47,670 and $34,452 of his salary for 2011 and 2010 was converted into 4,674 and 3,378 shares of our common stock, respectively based on a price of $10.20 per share, representing the closing market price for our common stock as of the date of Mr. Styles’ employment agreement. Stock awards of $3,450 for 2010 are comprised of the fair value of 750 shares of our common stock issued from our 2007 Stock Incentive Plan to Mr. Styles on December 17, 2007, which vested during each fiscal year based on the closing market price of $4.60 per share as of the date of issuance. We recognized the fair value of option awards in our Consolidated Financial Statements for fiscal 2011 and 2010 with a fair value totaling $247,785 and $63,270, respectively. These amounts do not reflect the actual amounts that may be realized. The 2010 amount is comprised of the fair value of a fully vested ten-year option to purchase 15,000 shares of common stock at an exercise price of $8.60 per share awarded on July 9, 2010 with a fair value of $127,860, and the vested portion of a ten-year option to purchase our common stock issued on October 4, 2010 at an exercise price of $10.20 per share. The total fair value of this option was $497,416, of which $288,910 and $119,925 was vested at December 31, 2011 and 2010, respectively. The fair values of the options were computed using the Black-Scholes option valuation method with the assumptions as detailed in Note 11 to the Notes to Consolidated Financial Statements. All other compensation for fiscal 2011 and 2010 was comprised of the value of rent of $4,293 and $7,360, respectively, for an apartment in the Czech Republic and $6,346 and $10,879 respectively, paid for an automobile. Mr. Styles resigned as an officer and director in July 2011.

(4)

The 2012 stock awards amount is comprised of the fair value of the vested portion of a grant of 20,000 shares of restricted stock award on August 17, 2012 at a price of $2.24 per share based on the closing market price of that date. The fair value of the award was $44,800, of which $16,693 was recognized in 2012. The 2011 option awards amount is comprised of the fair value of a fully vested ten-year option to purchase 8,750 shares of common stock at an exercise price of $10.40 per share awarded on March 14, 2011 with a fair value of $79,907. This amount does not reflect the actual amounts that may be realized. The fair values of the options were computed using the Black-Scholes option valuation method with the assumptions as detailed in Note 11 to the Notes to Consolidated Financial Statements.

The following table summarizes equity awards outstanding at December 31, 2012 for each of the executive officers named in the Summary Compensation Table above:

Outstanding Equity Awards at Fiscal Year End

	Option Awards										Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exciseable		Number of Securities Underlying Unexercised Options (#) Unexerciseable		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
William B. Smith		12,500		--		--	$	7.80	8/21/2016			--		--		--		--
Matthew DeVries		--		--		--		--		--		20,000		13,000
William B. Smith		250,000		166,667		83,333	$	1.70	3/11/2018			--		--		--		--
Matthew DeVries		--		--		--		--		--		27,241		30,510		--		--
Matthew DeVries		10,100		--		--	$	1.61	2/20/2023			--		--		--		--
Matthew DeVries		8,750		--		--	$	10.40	3/13/2021			--		--		--		--
Matthew DeVries		9,016		--		--	$	20.00	9/8/2018			--		--		--		--

Employment Agreements

We do not have agreements with any of our Named Executive Officers providing for payments, whether from resignation, retirement or other termination of employment, resulting from a change of control.

Director Compensation

Non-employee Director Compensation. Non-employee directors currently receive no cash compensation for serving on our board of directors, other than reimbursement of all reasonable expenses for attendance at board and board committee meetings. Under our 2007 Stock Incentive Plan, non-employee directors are entitled to receive stock options to purchase shares of common stock or restricted stock grants.

Employee Director Compensation. Directors who are employees of our company receive no compensation for services provided in that capacity, but are reimbursed for out-of-pocket expenses in connection with attendance at meetings of our board and its committees.

The table below summarizes the compensation we paid to non-employee directors for the year ended December 31, ~~2012~~2013:

Director Compensation

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
John J. Boyle III (1)		-		50,594		-		-		-		-		50,594
W. Duncan Troy (1)		-		103,929		26,161		-		-		-		130,090
John J. Boyle III (1)		-		50,594		-		-		-		-		50,594
W. Duncan Troy (1)		-		103,929		26,161		-		-		-		130,090
Paul D. Fletcher (2)		-		57,540		-		-		-		-		57,540
Mark W. Weber (2)		-		111,009		26,161		-		-		-		137,170
Charles E. Hunt (3)		-21,750		3955,~~683~~629		-		-		-		-		3977,~~683~~379
John E. Rehfeld (4)		-		5768,~~540~~372		-		-		-		-		5768,~~540~~372
W. Duncan Troy (5)		22,382		39,683		-		-		-		-		62,065
Joshua Hauser (5)		-		27,312		-		-		-		-		27,312
Mark W. Weber (6)		-		49,603		-		-		-		-		49,603
John J. Boyle, III (6)		-		36,106		-		-		-		-		36,106
Paul Fletcher (7)		-		41,060		-		-		-		-		41,060

_____________

(1) The ~~2012~~2013 stock awards amount is comprised of the fair value of the vested portion of a grant of 25,500 shares of restricted stock award on ~~Jun~~June 1, 2012 at a price of $3.40 per share based on the closing market price of that date. The fair value of the award was $86,700, of which $28,317 was recognized in 2013. It also includes the fair value of a fully vested grant of 30,000 shares of restricted common stock awarded on February 20, 2013 at a price of $1.61 per share and a fair value of $48,300 and the fair value of the vested portion of a grant of 50,~~594~~000 shares of restricted stock award on August 26, 2013 at a price of $1.20 per share based on the closing market price of that date. The fair value of the award was $60,000, of which $27,312 was recognized in ~~2012~~2013. The option awards amount is comprised of the fair value of a fully vested ten-year option to purchase 16,250 shares of common stock at an exercise price of $1.61 per share awarded on February 20, 2013 with a fair value of $26,161.

(2) The ~~2012~~2013 stock awards amount is comprised of the fair value of the vested portion of a grant of 29,000 shares of restricted stock award on ~~Jun~~June 1, 2012 at a price of $3.40 per share based on the closing market price of that date. The fair value of the award was $98,600, of which $5735,~~540~~397 was recognized in ~~2012~~2013. It also includes the fair value of a fully vested grant of 30,000 shares of restricted common stock awarded on February 20, 2013 at a price of $1.61 per share and a fair value of $48,300 and the fair value of the vested portion of a grant of 50,000 shares of restricted stock award on August 26, 2013 at a price of $1.20 per share based on the closing market price of that date. The fair value of the award was $60,000, of which $27,312 was recognized in 2013. The option awards amount is comprised of the fair value of a fully vested ten-year option to purchase 16,250 shares of common stock at an exercise price of $1.61 per share awarded on February 20, 2013 with a fair value of $26,161.

(3) The 2012 stock awards amount is comprised of the fair value of the vested portion of a grant of 20,000 shares of restricted stock award on Jun 1, 2012 at a price of $3.40 per share based on the closing market price of that date. The fair value of the award was $68,000, of which $39,683 was recognized in 2012.31

(43) Fees paid or earned in cash relates to consulting work performed for us by Mr. Hunt during 2013. Mr. Hunt converted $11,250 of this amount into 6,143 shares of our common stock based on the closing market price at the end of each month in which such fees were earned. The ~~2012~~2013 stock awards amount is comprised of the fair value of the vested portion of a grant of 2920,000 shares of restricted stock award on ~~Jun~~June 1, 2012 at a price of $3.40 per share based on the closing market price of that date. The fair value of the award was $9868,~~600~~000, of which $5728,~~540~~317 was recognized in ~~2012~~2013. It also includes the fair value of the vested portion of a grant of 50,000 shares of restricted stock award on August 26, 2013 at a price of $1.20 per share based on the closing market price of that date. The fair value of the award was $60,000, of which $27,312 was recognized in 2013.

(54) ~~Fees~~The ~~paid~~2013 instock ~~cash~~awards ~~represent~~amount ~~amounts~~is ~~paid~~comprised ~~for~~of ~~service~~the asfair ~~Sendio’s~~value ~~Executive~~of ~~Director~~the vested portion of a grant of 29,000 shares of restricted stock award on June 1, 2012 at a price of $3.40 per share based on the closing market price of that date. The ~~2012~~fair ~~stock~~value ~~awards~~of ~~amount~~the isaward ~~comprised~~was $98,600, of which $41,060 was recognized in 2013. It also includes the fair value of the vested portion of a grant of 2050,000 shares of restricted stock award on ~~Jun~~August 126, ~~2012~~2013 at a price of $31.4020 per share based on the closing market price of that date. The fair value of the award was $6860,000, of which $3927,~~683~~312 was recognized in ~~2012~~2013.

(65) The ~~2012~~2013 stock awards amount is comprised of the fair value of the vested portion of a grant of 2550,000 shares of restricted stock award on ~~Jun~~August 126, ~~2012~~2013 at a price of $31.4020 per share based on the closing market price of that date. The fair value of the award was $8560,000, of which $4927,~~603~~312 was recognized in ~~2012~~2013.

33(6) The 2013 stock awards amount is comprised of the fair value of the vested portion of a grant of 25,500 shares of restricted stock award on June 1, 2012 at a price of $3.40 per share based on the closing market price of that date. The fair value of the award was $86,700, of which $36,106 was recognized in 2013.

(7) The ~~option~~2013 ~~amounts~~stock doawards ~~not~~amount ~~reflect~~is comprised of the ~~actual~~fair ~~amounts~~value ~~that~~of ~~may~~the bevested ~~realized.~~portion ~~The~~of ~~fair~~a ~~values~~grant of ~~the~~29,000 ~~options~~shares ~~were~~of ~~computed~~restricted ~~using~~stock ~~the~~award ~~Black-Scholes~~on ~~option~~June ~~valuation~~1, ~~method~~2012 ~~with~~at a price of $3.40 per share based on the ~~assumptions~~closing asmarket ~~detailed~~price inof ~~Note~~that 11date. toThe fair value of the ~~Notes~~award towas ~~Consolidated~~$98,600, ~~Financial~~of ~~Statements~~which $41,060 was recognized in 2013.

The option amounts discussed above do not reflect the actual amounts that may be realized. The fair values of the options were computed using the Black-Scholes option valuation method with the assumptions as detailed in Note 10 to the Notes to Consolidated Financial Statements.

2007 Stock Incentive Plan

In October 2007, our board of directors adopted the Vu1 Corporation 2007 Stock Incentive Plan (the “Stock Plan”). As of December 31, ~~2012~~2013, ~~309~~595,~~004~~088 shares of common stock were reserved for issuance upon the exercise of outstanding stock options under the Stock Plan. Set forth below is a summary of the Stock Plan, but this summary is qualified in its entirety by reference to the full text of the Stock Plan, which has been filed with the SEC, and any stockholder who wishes to obtain a copy of the Stock Plan may do so by written request to Vu1 Corporation, 11001 ~~Liberty~~Camelia ~~Plaza~~Ave, ~~23rd Floor~~Berkeley, ~~New~~CA ~~York~~94710, ~~NY 10006,~~ Attention: Mr. Matthew DeVries, Chief Financial Officer.

Administration. The Stock Plan is administered by our board of directors, or a committee appointed by, and consisting of two or more members of the board of directors. Each member of the committee must exhibit the independence necessary to comply with any applicable securities law, the rules of the exchange on which our common stock is traded or any other applicable law, as necessary. Committee members serve for such term as the board may determine, subject to removal by the board at any time.

Except for the terms and conditions explicitly set forth in the Stock Plan, the administrator has exclusive authority, in its discretion, to determine all matters relating to awards under the Stock Plan, including the selection of individuals to be granted awards, the type of awards, the number of shares of common stock subject to an award, all terms, conditions, restrictions and limitations, if any, of an award and the terms of any document, agreement or instrument that evidences the award. The administrator also has exclusive authority to interpret the Stock Plan and may from time to time adopt, and change, rules and regulations of general application for the Stock Plan’s administration. The administrator’s interpretation of the Stock Plan and its rules and regulations, and all actions taken and determinations made by the administrator pursuant to the Stock Plan, are conclusive and binding on all parties involved or affected. The administrator may delegate administrative duties to such of our officers as it so determines.

Shares subject to the Stock Plan. The Stock Plan authorizes the granting of awards for up to an aggregate of 1,000,000 shares of our authorized but unissued common stock (subject to adjustment as described below). Shares that were previously the subject of an award under the Stock Plan that are no longer subject to the award become available for future grant.32

Shares subject to the Stock Plan. The Stock Plan authorizes the granting of awards for up to an aggregate of 2,500,000 shares of our authorized but unissued common stock (subject to adjustment as described below). Shares that were previously the subject of an award under the Stock Plan that are no longer subject to the award become available for future grant.

Eligible Participants. All of our employees, directors, officers, consultants, agents, advisors and independent contractors and of our subsidiaries are eligible to participate in the Stock Plan, as selected by the administrator.

Awards. The administrator has the authority, in its sole discretion, to determine the type or types of awards to be made under the Stock Plan. Such awards include incentive stock options, nonqualified stock options and stock awards. Awards may be granted singly or in combination. An eligible person may receive one or more grants of awards as the administrator may from time to time determine, and such determinations may be different as to different holders and may vary as to different grants, even when made simultaneously.

·	Stock Options. Each option will vest and become exercisable from time to time over such period and upon such terms as the administrator may determine; provided that unless the administrator specifies a different schedule, the default vesting rate is 36 months after the grant date. The exercise price of each stock option granted will be as determined by the administrator, but will not be less than 100% of the fair market value of the common stock on the date the option is granted. The administrator has the authority to determine the treatment of stock option grants upon a participant’s retirement, disability, death or termination. Stock options granted under the Stock Plan may not be assigned or transferred by the holder of the option other than by will or by the applicable laws of descent and distribution and, during the holder’s lifetime, such awards may be exercised only by the holder.

	With respect to incentive stock options, (i) the aggregate fair market value of the common stock with respect to which options are exercisable for the first time by a participant in any calendar year may not exceed $100,000 (with any amount in excess of $100,000 being treated as a nonqualified stock option) and (ii) the expiration date of such options may not be more than ten years after the date of the grant.

	Incentive stock options may be granted to a person who, at the time the option is granted, owns more than 10% of our outstanding voting capital stock only if the exercise price per share is not less than 110% of the fair market value of the common stock on the grant date and the option term does not exceed five years from the grant date.

·	Restricted Stock Awards. The administrator, in its discretion, may grant restricted stock awards to participants on terms and conditions established by the administrator, including vesting terms conditioned on performance-based criteria or time of continuous service to us, rights of repurchase, and other terms, conditions and restrictions. Such terms may include, but are not limited to, acceleration of vesting or termination of rights to repurchase shares upon events such as death or disability of a participant or termination of a participant’s employment or term of board service. A participant to whom an award of restricted stock is made will generally have all the rights of a stockholder with respect to such shares, including the right to vote and to receive dividends, except as set forth in the applicable award agreement.

Adjustments. If our outstanding common stock is at any time changed or exchanged by declaration of a stock dividend, stock split, reverse stock split, combination of shares, recapitalization, merger, consolidation or other corporate reorganization, in which we are the surviving corporation, an appropriate adjustment will be made in the number and kind of shares that have been awarded pursuant to the Stock Plan and that may be thereafter awarded.

In the event of any "corporate transaction" (a term defined in the Stock Plan generally as a change in control), all outstanding awards will become fully vested and exercisable immediately prior to the effective date of the corporate transaction. The outstanding awards will not become fully vested if replaced by a comparable award as determined by the administrator by the successor company.

Withholding. If any withholding amount for the exercise of a stock option or restricted stock award under the Stock Plan is required by law, we may (a) require a participant to remit a cash amount sufficient to satisfy, in whole or in part, any federal, state and local withholding requirements prior to delivery of certificates for common stock, (b) grant a participant the right to satisfy any withholding requirements, in whole or in part, by electing to require that we withhold from the shares of common stock issuable to the participant, that number of full shares of common stock having a fair market value equal to the amount required to be withheld, (c) grant a participant the right to deliver shares of unrestricted stock to us, or (d) satisfy withholding requirements through any other lawful method, such as through additional withholdings against the participant’s other wages with us.

Termination of Stock Plan. The board of directors may suspend, terminate or amend the Stock Plan at any time without stockholder approval, except as stockholder approval may be required under (a) Rule 16b-3 of the Securities Exchange Act of 1934, (b) the Internal Revenue Code or certain regulations promulgated pursuant to the Code, (c) the rules for listed companies on the national securities exchange on which the common stock is traded, if applicable, or (d) any other applicable law or rule. No incentive stock options may be granted under the Stock Plan after October 26, 2017.

3534

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information regarding the number of shares of our common stock beneficially owned on March 20, ~~2013~~2014 by:

·	each person who is known by us to beneficially own 5% or more of our common stock,

·	each of our directors and executive officers, and

·	all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of our common stock which may be acquired upon exercise or conversion of stock options, warrants or other convertible securities which are currently exercisable or convertible, or which become exercisable within 60 days after the date indicated in the table, are deemed beneficially owned by those holders. Subject to any applicable community property laws, the persons or entities named in the table below have sole voting and investment power with respect to all shares indicated as beneficially owned by them.

Name and Address of Beneficial Owner (1)	Amount and Nature of Beneficial Owner (2)					~~Percent of Class (3)~~	Percent of Class (3)
SAM Special Opportunity Fund		1,264,894	(4	)			14.9	%
Scott D. Hodges		1,783,099		(4	)			16.7	%
SAM Advisors LLC		1,264,894	(4	)			14.9	%
8843 Forest Creek Lane
William B. Smith		1,264,894	(4	)			14.9	%
Ooltewah Tennessee 37363
111 Broadway, Suite 808
SAM Special Opportunity Fund		1,222,529		(5	)			11.4	%
New York, New York 10006
SAM Advisors LLC		1,222,529		(5	)			11.4	%
Polymer Holdings, Ltd.		715,058	(5	)			8.4	%
William B. Smith		1,222,529		(5	)			11.4	%
Broomhill Road
111 Broadway, Suite 808
Stonehaven, UK AB39 2NH
New York, New York 10006
Matthew DeVries		85,366	(6	)			1.0	%
Polymer Holdings, Ltd.		691,756						6.5	%
John J. Boyle III		-					*
Broomhill Road
Paul D. Fletcher		210,000	(7	)			2.5	%
Stonehaven, UK AB39 2NH
Charles Hunt, Ph. D.		84,138	(8	)			1.0	%
Mark W. Weber		391,796		(6	)			3.7	%
John E. Rehfeld		-					*
Duncan Troy		142,850		(7	)			1.3	%
Duncan Troy		134,517	(9	)			1.6	%
Matthew DeVries		135,366		(8	)			1.3	%
Mark W. Weber		257,033	(10	)			3.0	%
Charles Hunt, Ph. D.		113,796		(9	)			1.1	%
All directors and officers as a group (10 persons)		2,035,948	(11	)			23.9	%
John E. Rehfeld		79,000						0.7	%
Joshua Hauser		50,000						0.5	%
All directors and officers as a group (9 persons)		2,135,337		(10	)			20.0	%

~~_____________~~35

*	Less than 1% of outstanding shares.
(1)	Unless otherwise indicated, the address of each person is c/o Vu1 Corporation, 1001 Camelia Avenue Berkeley, CA 94710.
(1)	Unless otherwise indicated, the address of each person is c/o Vu1 Corporation, 1 Liberty Plaza, 23rd Floor, New York, New York 10006.
(2)	Unless otherwise indicated, includes shares owned by a spouse, minor children and relatives sharing the same home, as well as entities owned or controlled by the named person. Also includes shares if the named person has the right to acquire those shares within 60 days after March 20, 2014, by the exercise or conversion of any warrant, stock option or other convertible securities. Unless otherwise noted, shares are owned of record and beneficially by the named person.
(2)	Unless otherwise indicated, includes shares owned by a spouse, minor children and relatives sharing the same home, as well as entities owned or controlled by the named person. Also includes shares if the named person has the right to acquire those shares within 60 days after March 20, 2013, by the exercise or conversion of any warrant, stock option or other convertible securities. Unless otherwise noted, shares are owned of record and beneficially by the named person.
(3)	The calculation in this column is based upon 10,701,097 shares of common stock outstanding on March 20, 2014. The shares of common stock underlying warrants, stock options or other convertible securities are deemed outstanding for purposes of computing the percentage of the person holding them but are not deemed outstanding for the purpose of computing the percentage of any other person.
(4)	Includes warrants to purchase 574,000 shares of common stock at an exercise price of $2.00 per share, warrants to purchase 65,000 shares of common stock at an exercise price of $1.50 per share and warrants to purchase 200,000 shares of common stock at $1.25 per share.
(5)	Consists of 354,207 shares of common stock held by SAM Special Opportunity Fund, LP, an investment partnership advised by SAM Advisors, LLC, and 500,772 shares of common stock held by SAM Advisors, LLC, a money management firm. Also includes options to purchase 12,500 shares of common stock at an exercise price of $7.80 per share and options to purchase 250,000 shares of common stock at an exercise price of $1.70 per share held by Mr. Smith. Mr. Smith, our Chairman and Chief Executive Officer, is the President and Chief Executive Officer of SAM Advisors, LLC.
(6)	Consists of 142,565 shares of common stock held by the Weber Revocable Living Trust. Includes warrants to purchase 16,429 shares of common stock at an exercise price of $11 per share, warrants to purchase 6,667 shares of common stock at an exercise price of $2.00 per share and warrants to purchase 72,385 shares of common stock at an exercise price of $1.50 per share. Also includes a stock option to purchase 7,500 shares of common stock at $20.00 per share, a stock option to purchase 3,750 shares of common stock at an exercise price of $13.00 per share, a stock option to purchase 8,750 shares of common stock at an exercise price of $10.40 per share, a stock option to purchase 12,500 shares of common stock at an exercise price of $7.60 per share and a stock option to purchase 16,250 shares of common stock at an exercise price of $1.61 per share.
(7)	Includes a stock option to purchase 7,500 shares of common stock at an exercise price of $20.00 per share, a stock option to purchase 2,500 shares of common stock at an exercise price of $13.00 per share, a stock option to purchase 10,000 shares of common stock at an exercise price of $10.40 per share, a stock option to purchase 16,250 shares of common stock at an exercise price of $1.61 per share.
(8)	Includes a stock option to purchase 9,016 shares of common stock at an exercise price of $20.00 per share, stock options to purchase 8,750 shares of common stock at an exercise price of $10.40 per share and options to purchase 10,100 shares of common stock at an exercise price of $1.61 per share.
(9)	Includes a stock option to purchase 4,500 shares of common stock at an exercise price of $20.00 per share, a stock option to purchase 2,500 shares of common stock at an exercise price of $13.00 per share, a stock option to purchase 3,750 shares of common stock at an exercise price of $10.40 per share, a stock option to purchase 12,500 shares of common stock at an exercise price of $7.60 per share and a stock option to purchase 6,250 shares of common stock at an exercise price of $4.60 per share.
(10)	Comprised of William B. Smith, Mark Weber, Matthew DeVries, Charles Hunt, John E. Rehfeld, Duncan Troy and Joshua Hauser.

(3)	The calculation in this column is based upon 8,501,793 shares of common stock outstanding on March 20, 2013. The shares of common stock underlying warrants, stock options or other convertible securities are deemed outstanding for purposes of computing the percentage of the person holding them but are not deemed outstanding for the purpose of computing the percentage of any other person.
(4)	Consists of 354,207 shares of common stock and warrants to purchase 77,912 shares of common stock at an exercise price of $15.00 per share held by SAM Special Opportunity Fund, LP, an investment partnership advised by SAM Advisors, LLC, and 570,275 shares of common stock held by SAM Advisors, LLC, a money management firm. Also includes options to purchase 12,500 shares of common stock at an exercise price of $7.80 per share and options to purchase 83,334 shares of common stock at an exercise price of $1.70 per share. Does not include options to purchase 166,666 shares of common stock as these options are not vested within 60 days of March 20, 2013. Mr. Smith, our Chairman and Chief Executive Officer, is the President and Chief Executive Officer of SAM Advisors, LLC.
(5)	Includes warrants to purchase 23,302 shares of common stock at an exercise price of $15.00 per share.
(6)	Includes stock options to purchase 9,016 shares of common stock at an exercise price of $20.00 per share, stock options to purchase 8,750 shares of common stock at an exercise price of $10.60 per share and options to purchase 10,100 shares of common stock at an exercise price of $1.61 per share. Does not include a restricted stock award of 20,000 shares of common stock as these shares are not vested within 60 days of March 20, 2013.
(7)	Includes warrants to purchase 105,000 shares of common stock at an exercise price of $1.50 per share.
(8)	Includes stock options to purchase 12,500 shares of common stock at an exercise price of $7.60 per share, a stock option to purchase 6,250 shares of common stock at an exercise price of $4.60 per share, a stock option to purchase 2,500 shares of common stock at an exercise price of $13.00 per share, a stock option to purchase 12,000 shares of common stock at an exercise price of $20.00 per share, and a stock option to purchase 3,750 shares of common stock at an exercise price of $10.60 per share.
(9)	Includes a stock option to purchase 7,500 shares of common stock at an exercise price of $20.00 per share, a stock option to purchase 2,500 shares of common stock at an exercise price of $13.00 per share, a stock option to purchase 10,000 shares of common stock at an exercise price of $10.60 per share, a stock option to purchase 16,250 shares of common stock at an exercise price of $1.61 per share and 46,667 shares of common stock held by Private Equity III Ltd., an investment entity of which Mr. Troy is a director.
(10)	Includes a stock option to purchase 12,500 shares of common stock at an exercise price of $7.60 per share, a stock option to purchase 7,500 shares of common stock at $20.00 per share, a stock option to purchase 3,750 shares of common stock at an exercise price of $13.00 per share, a stock option to purchase 8,750 shares of common stock at an exercise price of $10.60 per share, and 1,171 shares of common stock held by Weber Marketing Group, Inc., a corporation wholly owned by Mr. Weber.
(11)	Comprised of William B. Smith, Matthew DeVries, John J. Boyle III, Paul D. Fletcher, Charles Hunt, John E. Rehfeld, Duncan Troy and Mark Weber.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The following is a summary description of all transactions during the year ended December 31, ~~2012~~2013 and to date, and any currently proposed transactions, between us and any of our related parties. All ongoing and any future related party transactions have been and will be made or entered into on terms that are no less favorable to us than those that may be obtained from an unaffiliated third party. In addition, any future related party transactions must be approved by a majority of the disinterested members of our board of directors. If a related person proposes to enter into such a transaction with us, such proposed transaction must be reported to us, in advance.

Related Party Transactions

During the year ended December 31, ~~2012,~~2013 we ~~paid~~issued ~~consulting~~48,842 ~~fees~~shares of common stock with a fair value of $~~125~~75,000 to SAM Advisors, LLC ~~for services rendered to us~~. In ~~addition,~~The ~~From~~issuances ~~August~~were ~~31,~~based ~~2012~~on tothe ~~December~~closing ~~31,~~market ~~2012,~~prices weas ~~issued 56,208 shares~~ of ~~common~~the ~~stock~~date ~~with a fair value~~ of ~~$62,500~~issuance ~~to SAM Advisors, LLC~~ pursuant to our agreement ~~with SAM~~ to convert ~~its~~their $12,500 monthly consulting fee to ~~common~~ stock at the ~~price~~closing ofmarket ~~our~~price ~~common stock~~ on the last business day of each month. SAM Advisors, ~~LLC~~Inc. is ~~owned~~an entity controlled by William B. Smith, our ~~Chairman~~chairman and ~~Chief~~chief ~~Executive~~executive ~~Officer~~officer.

~~Two~~During the year ended December 31, 2013 we issued 6,143 shares of ~~our~~common ~~board~~stock ~~members~~with ~~invested~~a fair value of $~~105~~11,~~000~~250 ~~and~~to ~~$15~~Charles Hunt,~~000~~ a member of our board of directors. The issuances were based in the closing market prices as of the date of issuance pursuant to our ~~unit~~agreement ~~private~~to ~~placement~~convert $3,750 asof ~~discussed~~his inmonthly ~~Note~~consulting 11fee to stock at the ~~Notes~~closing tomarket ~~Consolidated~~price ~~Financial~~on ~~Statements~~the last business day of each month.

~~One~~Except ofas ~~our~~otherwise ~~board~~disclosed ~~members converted a loan totaling $57~~above,~~385~~ ~~(including~~none ~~$7,385~~ of ~~accrued~~our ~~interest and loan fees) into 16~~directors,~~396~~ ~~shares~~executive ~~of our common stock~~officers, ~~three~~greater ~~year~~than ~~warrants~~five topercent ~~purchase 16~~stockholders,~~396~~ ~~shares~~or ofany ~~our~~associate ~~common~~or ~~stock~~affiliate atthereof anhad ~~exercise~~any ~~price~~material ~~of $3.75 per share and three year warrants to purchase 16~~interest,~~429~~ ~~shares~~direct ofor ~~our common stock at an exercise price of $11.00 per share~~indirect, asin ~~discussed~~any intransaction ~~Note~~with 8us toduring the ~~Notes~~year toended ~~Consolidated~~December ~~Financial~~31, ~~Statements~~2013.

During the year ended December 31, 2012, we paid fees of $22,382 to Duncan Troy for services rendered as the managing director of Sendio. Mr. Troy is a member of our board of directors.

In September 2010, we entered into an agreement with Integrated Sales Solutions II, LLC (“ISS”) to enhance our capabilities in designing and establishing sales strategy and distribution channels with retail, electrical utilities, electrical distributors and government agencies. ISS became a related party to us upon the appointment of Bill K. Hamlin to our board of directors in October 2010. Mr. Hamlin is the Chief Executive Officer of ISS. In April 2011, we entered into an agreement with Hamlin Consulting, LLC to advise and assist us in defining logistics, warehousing, finished goods requirements, distribution, packaging, merchandising and support for our ESL bulbs. ISS and Hamlin Consulting are owned by Bill K. Hamlin, a former director of our company and our former President and Chief Operating Officer. We paid $13,268 to ISS and $45,000 to Hamlin Consulting for the year ended December 31, 2012.

Except as otherwise disclosed above, none of our directors, executive officers, greater than five percent stockholders, or any associate or affiliate thereof had any material interest, direct or indirect, in any transaction with us during the year ended December 31, 2012.

Director Independence

~~Six~~Five members of our board of directors, ~~John J. Boyle III, Paul D. Fletcher,~~ Charles E. Hunt, John E. Rehfeld, Duncan Troy, Joshua Hauser and Mark W. Weber, are considered “independent” within the meaning of the listing rules of the Nasdaq Stock Market.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees Paid to Peterson Sullivan, LLP for Fiscal ~~2012~~2013 and ~~2011~~2012

The following is a summary of the aggregate fees billed to us by Peterson Sullivan LLP, our current independent registered public accounting firm, for the fiscal years ended December 31, ~~2012~~2013 and ~~2011~~2012:

	Fiscal 2013		Fiscal 2012
Audit Fees	$	48,185	$	40,800
Audit Related Fees		—		16,800
Tax Fees		—		—
All Other Fees		—		—
Total Fees	$	48,185	$	57,600

	Fiscal 2012		Fiscal 2011
Audit Fees	$	40,800	$	40,000
Audit Related Fees		16,800		29,325
Tax Fees		—		—
All Other Fees		—		—
Total Fees	$	57,600	$	69,325

Policy for Approval of Audit and Permitted Non-Audit Services

Our ~~Board~~Audit ofCommittee ~~Directors, which serves as our audit committee,~~ reviews the scope and extent of all audit and non-audit services to be provided by the independent auditors, including any engagement letters, and reviews and pre-approves all fees to be charged for such services. During ~~2012~~2013 and ~~2011~~2012, our independent auditors did not provide any non-audit services to us. The Board of Directors may establish additional or other procedures for the approval of audit and non-audit services that our independent auditors perform. In pre-approving services to be provided by the independent auditors, the Board of Directors considers whether such services are consistent with applicable rules regarding auditor independence.

3937

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

Documents filed as part of this Annual Report are as follows:

1. Financial Statements: The following Consolidated Financial Statements, related notes and report of independent registered public accounting firm are incorporated by reference into Item 8 of Part II of this Annual Report:

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2012 and 2011	F-3
Consolidated Balance Sheets as of December 31, 2013 and 2012	F-3
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2012 and 2011	F-4
Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2013 and 2012	F-4
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2012 and 2011	F-5
Consolidated Statements of Stockholders’ Equity (Deficit) for the Years Ended December 31, 2013 and 2012	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012 and 2011	F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013 and 2012	F-6
Notes to the Consolidated Financial Statements	F-7

2. Financial Statement Schedules: All schedules have been omitted because they are not applicable or not required, or the required information is included in the financial statements or notes thereto.

~~3. Exhibits.~~38

Exhibit No.		Description
3.1A	(1)	Amended and Restated Articles of Incorporation of Vu1 Corporation dated June 30, 2000.
3.1B	(1)	Certificate of Amendment of Articles of Incorporation dated May 19, 2008.
3.1C	(1)	Certificate of Amendment of Articles of Incorporation dated August 25, 2008.
3.1D	(17)	Certificate of Amendment of Articles of Incorporation dated November 10, 2011.
3.2A	(2)	Bylaws of Vu1 Corporation.
3.2B	(3)	Amendment of Bylaws effective August 6, 1997.
3.2C	(16)	Amendment of Bylaws effective September 30, 2011.
4.1	(11)	Form of Common Stock Purchase Warrant of Vu1 Corporation, dated February 3, 2011, for each investor. (15)
10.1	(4)	Vu1 Corporation 2007 Stock Incentive Plan.
10.2	(5)	Form of Vu1 Corporation Stock Option Agreement.
10.4	(6)	Lease Contract between Sendio s.r.o. and Milan Gottwald, dated May 28, 2008.
10.5A	(7)	Purchase Agreement between Sendio s.r.o. and Milan Gottwald, dated November 25, 2008.
10.5B	(8)	Business Agreement, as an annex to the Purchase Agreement, between Sendio, s.r.o and Milan Gottwald, dated March 3, 2009.
10.6	(7)	Deed of Guarantee between Vu1 Corporation and Milan Gottwald, dated November 24, 2008.
10.7	(9)	Tenancy Agreement between Sendio s.r.o. and Milan Gottwald, dated December 2, 2009.
10.8	(9)	Amendment No. 2 to the Purchase Agreement dated November 25, 2008 dated December 2, 2009 between Sendio s.r.o. and Milan Gottwald.
10.9	(10)	Executive Employment Agreement effective October 4, 2010 by and between the Company and Philip Styles.
10.10	(11)	Securities Purchase Agreement, dated as of February 3, 2011, between Vu1 Corporation and each purchaser identified on the signature pages thereto.

3. Exhibits. [MD TO UPDATE]

Exhibit No.		Description

3.1A	(1)	Amended and Restated Articles of Incorporation of Vu1 Corporation dated June 30, 2000.

3.1B	(1)	Certificate of Amendment of Articles of Incorporation dated May 19, 2008.

3.1C	(1)	Certificate of Amendment of Articles of Incorporation dated August 25, 2008.

3.1D	(13)	Certificate of Amendment of Articles of Incorporation dated November 10, 2011.

3.2A	(2)	Bylaws of Vu1 Corporation.

3.2B	(3)	Amendment of Bylaws effective August 6, 1997.

3.2C	(12)	Amendment of Bylaws effective September 30, 2011.

4.1	(11)	Form of Common Stock Purchase Warrant of Vu1 Corporation, dated February 3, 2011, for each investor. (15)

4.2	(6)	Loan Agreement, dated December 20, 2012 between Vu1 Corporation and each of the lenders identified on the signature pages thereto

10.1	(4)	Vu1 Corporation 2007 Stock Incentive Plan, as amended August 26, 2013

10.2	(5)	Form of Vu1 Corporation Stock Option Agreement.

10.3	(6)	Subscription Agreement, dated December 20, 2012 between Vu1 Corporation and each of the subscribers identified on the signature pages thereto

10.4	(6)	Form of Common Stock Purchase Warrant dated December 20, 2012

10.5	(6)	Deed of Assignment of Debts, dated December 20, 2012 between Vu1 Corporation and Venture Capital (Europe) Limited

10.6	(7)	Form of Letter Agreement, dated as of June 18, 2013, between Vu1 Corporation and certain Debenture Holders for extension or conversion of the Debentures.

10.7	(8)	Form of Securities Purchase Agreement, dated as of June 15, 2011, between Vu1 Corporation and each purchaser identified on the signature pages thereto.

10.8	(8)	Form of Original Issue Discount Convertible Debenture issued June 22, 2011, by Vu1 Corporation to each of the purchasers.

10.9	(8)	Form of Common Stock Purchase Warrant issued June 22, 2011, by Vu1 Corporation to each of the purchasers.

10.10	(8)	Registration Rights Agreement, dated as of June 16, 2011, between Vu1 Corporation and each of the purchasers.

10.11	(9)	Form of 12% Convertible Promissory Note for interim bridge loan.

14.1	(10)	Code of Business Conduct and Ethics.

14.2	(10)	Code of Ethics for the CEO and Senior Financial Officers.

21.1	(10)	List of Subsidiaries.

31.1	**	Rule 13a-14(a)/15d-14(a) Certification of William B. Smith

31.2	**	Rule 13a-14(a)/15d-14(a) Certification of Matthew DeVries

32.1	**	Certification of William B. Smith, CEO, and Matthew J. DeVries, CFO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

10.11	(11)	Registration Rights Agreement, dated as of February 3, 2011, between Vu1 Corporation and each of the several purchasers signatory thereto.
101 INS		XBRL Instance Document*
10.13	(12)	Vu1 Corporation 2007 Stock Incentive Plan, as amended on March 14, 2011.
101 SCH		XBRL Schema Document*
10.14	(13)	Employment Agreement, dated April 27, 2011, between Vu1 Corporation and Scott C. Blackstone, Ph.D.
101 CAL		XBRL Calculation Linkbase Document*
10.15	(14)	Form of Securities Purchase Agreement, dated as of June 15, 2011, between Vu1 Corporation and each purchaser identified on the signature pages thereto.
101 DEF		XBRL Definition Linkbase Document*
10.16	(14)	Form of Original Issue Discount Convertible Debenture issued June 22, 2011, by Vu1 Corporation to each of the purchasers.
101 LAB		XBRL Labels Linkbase Document*
10.17	(14)	Form of Common Stock Purchase Warrant issued June 22, 2011, by Vu1 Corporation to each of the purchasers.
101 PRE		XBRL Presentation Linkbase Document*
10.18	(14)	Registration Rights Agreement, dated as of June 16, 2011, between Vu1 Corporation and each of the purchasers.
10.19	(14)	Amendment No. 1 to the Lease Contract, dated December 2, 2009 between Sendio s.r.o. and Milan Gottwald.
10.20	(14)	Amendment No. 3 to the Purchase Agreement dated November 25, 2008 between Sendio s.r.o. and Milan Gottwald.
10.21	(15)	Employment Agreement, dated July 28, 2011, between Vu1 Corporation and Bill K. Hamlin.
10.22	(18)	Form of 12% Convertible Promissory Note for interim bridge loan.
10.23	(19)	Form of Common Stock Purchase Warrant of Vu1 Corporation, issued December 20, 2012 by Vu1 for each investor.
10.24	(19)	Form of Securities Purchase Agreement, dated December 20, 2012, between Vu1 Corporation and each investor.
10.25	(19)	Form of Loan Agreement, dated as of December 20, 2012, between Vu1 Corporation and each purchaser.
10.26	(19)	Deed of Assignment dated as of December 20, 2012, between Vu1 Corporation and each purchaser.
14.1	(12)	Code of Business Conduct and Ethics.
14.2	(12)	Code of Ethics for the CEO and Senior Financial Officers.
21.1	(12)	List of Subsidiaries.
31.1	**	Rule 13a-14(a)/15d-14(a) Certification of William B. Smith
31.2	**	Rule 13a-14(a)/15d-14(a) Certification of Matthew DeVries
32.1	**	Certification of William B. Smith, CEO, and Matthew J. DeVries, CFO, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 INS	*	XBRL Instance Document*
101 SCH	*	XBRL Schema Document*
101 CAL	*	XBRL Calculation Linkbase Document*
101 DEF	*	XBRL Definition Linkbase Document*
101 LAB	*	XBRL Labels Linkbase Document*
101 PRE	*	XBRL Presentation Linkbase Document*

41* The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

~~_______________~~39

Unless otherwise indicated, exhibits were previously filed.

*	The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
**	Filed herewith.
(1)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on September 15, 2008.
(2)	Previously filed as an exhibit to, and incorporated herein by reference from, our Quarterly Report on Form 10-QSB as filed with the Commission on November 12, 1996.
(3)	Previously filed as an exhibit to, and incorporated herein by reference from, our Annual Report on Form 10-K filed on April 15, 1998.
(4)	Previously filed as an exhibit to, and incorporated herein by reference from, our Quarterly Report on Form 10-QSB as filed with the Commission on November 14, 2007.
(5)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on November 21, 2007.
(6)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on June 3, 2008.
(7)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on December 15, 2008.
(8)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on March 6, 2009.
(9)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on December 15, 2009.
(10)	Previously filed as an exhibit to, and incorporated herein by reference from, our Quarterly Report on Form 10-Q filed on November 22, 2010.
(11)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on February 11, 2011.
(12)	Previously filed as an exhibit to, and incorporated herein by reference from, our Annual Report on Form 10-K filed on March 31, 2011.
(13)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on May 3, 2011.
(14)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on June 22, 2011.
(15)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on August 3, 2011.
(16)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on October 25, 2011.
(17)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on November 16, 2011.
(18)	Previously filed as an exhibit to, and incorporated herein by reference from, our Quarterly Report on Form 10-Q filed on November 21, 2011.
(19)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on January 31, 2013.
	(b)	The financial statement schedules are either not applicable or the required information is included in the financial statements and footnotes related thereto.

**	Filed herewith.

(1)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on September 15, 2008.

(2)	Previously filed as an exhibit to, and incorporated herein by reference from, our Quarterly Report on Form 10-QSB as filed with the Commission on November 12, 1996.

(3)	Previously filed as an exhibit to, and incorporated herein by reference from, our Annual Report on Form 10-K filed on April 15, 1998.

(4)	Previously filed as an exhibit to, and incorporated herein by reference from, Current Report on Form 8-K filed on August 30, 2013.

(5)	Previously filed as an exhibit to, and Previously filed as an exhibit to, and incorporated herein by reference from, Current Report on Form 8-K filed on November 21, 2007.

(6)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on January 31, 2013.

(7)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on June 27, 2013.

(8)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on June 22, 2011.

(9)	Previously filed as an exhibit to, and incorporated herein by reference from, our Quarterly Report on Form 10-Q filed on November 21, 2011.

(10)	Previously filed as an exhibit to, and incorporated herein by reference from, our Annual Report on Form 10-K filed on March 31, 2011.

(11)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on February 11, 2011.

(12)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on October 25, 2011.

(13)	Previously filed as an exhibit to, and incorporated herein by reference from, our Current Report on Form 8-K filed on November 16, 2011.

(b) The financial statement schedules are either not applicable or the required information is included in the financial statements and footnotes related thereto.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	VU1 CORPORATION
Date: March 28, 2013	By:	/s/William B. Smith
Date: March 31, 2014	By:	/s/William B. Smith
		William B. Smith
		(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/ William B. Smith William B. Smith	Chairman of the Board and Chief Executive Officer (principal executive officer)	March 2831, ~~2013~~2014
/s/ Matthew J. DeVries Matthew J. DeVries	Chief Financial Officer (principal financial and accounting officer)	March 2831, ~~2013~~2014
/s/ John J. Boyle III John J. Boyle III	Director	March 28, 2013
/s/ Duncan Troy Duncan Troy	Director	March 31, 2014
/s/ Paul D. Fletcher Paul D. Fletcher	Director	March 28, 2013
/ s/ Mark W. Weber Mark W. Weber	Director	March 31, 2014
/s/ Charles E. Hunt, Ph.D. Charles E. Hunt, Ph.D.	Director	March 2831, ~~2013~~2014
/s/ John E. Rehfeld John E. Rehfeld	Director	March 2831, ~~2013~~2014
/s/ Duncan Troy Duncan Troy	Director	March 28, 2013
/s/ Joshua Hauser Joshua Hauser	Director	March 31, 2014
/s/ Mark W. Weber Mark W. Weber	Director	March 28, 2013

4341

Vu1 CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Audited Financial Statements:
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2012 and 2011	F-3
Consolidated Balance Sheets as of December 31, 2013 and 2012	F-3
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2012 and 2011	F-4
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2013 and 2012	F-4
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2012 and 2011	F-5
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2013 and 2012	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2012 and 2011	F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2013 and 2012	F-6
Notes to Consolidated Financial Statements	F-7

F - 1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Vu1 Corporation

~~New York~~Berkeley, ~~New York~~California

We have audited the accompanying consolidated balance sheets of Vu1 Corporation and Subsidiaries ("the Company") as of December 31, ~~2012~~2013 and ~~2011~~2012, and the related consolidated statements of operations and comprehensive loss, stockholders' equity (deficit), and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our ~~audit~~audits 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements~~. An~~, ~~audit also includes~~ assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Vu1 Corporation and Subsidiaries as of December 31, ~~2012~~2013 and ~~2011~~2012, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company incurred a 2013 net loss of $35,~~825~~019,~~448~~977, and it had negative cash flows from operations of $1,~~568~~716,~~781~~606 in ~~2012~~2013. In addition, the Company had an accumulated deficit of $8388,~~406~~426,~~639~~616 at December 31, ~~2012~~ 2013. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans regarding those matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/S/ PETERSON SULLIVAN LLP

Seattle, Washington

March 2831, ~~2013~~2014

F - 2

Vu1 CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
	DECEMBER 31,			DECEMBER 31,
ASSETS	~~2012~~2013			~~2011~~2012
Current assets
Cash	$	~~328~~92,~~188~~795		$	10328,~~992~~188
Accounts receivable		-			3,616
Prepaid expenses		190,005			42,722
Tax refund receivable		-			57,089
Total current assets		282,800			370,910
Prepaid expenses		42,722			38,948
Total current assets		370,910			110,645
Non-current assets
Equipment, net of accumulated depreciation of $23,586 and $318,424, respectively		-			1,740
Equipment, net of accumulated depreciation of $3,402 and $0		30,614			-
Loan costs		~~118,500~~-			~~325~~118,~~244~~500
Total assets	$	~~489~~313,~~410~~414		$	~~437~~489,~~629~~410
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	1,~~008~~148,~~692~~368		$	1956,~~012,186~~558
Accrued payroll		192,725			~~475~~192,~~176~~725
Loan payable		100,000			-
Accrued interest		324,531			52,134
Convertible debentures, net of discount of $571,254 and $0, respectively		3,546,496			-
Loan payable		100,000			100,000
Convertible bridge loans		309,000			-
Convertible debentures, net of discount of $0 and $571,254, respectively		3,905,975			3,546,496
Liabilities of Sendio		555,454			-
Convertible bridge loans		-			309,000
Capital lease obligation, current portion		-			5,624
Liabilities of Sendio		555,454			555,454
Total current liabilities		56,~~712~~227,~~367~~053			15,~~492~~712,~~986~~367
Long-term liabilities
Total liabilities		6,227,053			5,712,367
Convertible debentures, net of discount of $0 and $1,603,838, respectively		-			2,513,912
Stockholders' deficit
Convertible bridge loans		-			489,250
Vu1 Corporation's stockholders' deficit
Derivative warrant liability		-			592,783
Capital lease obligation, net of current portion		-			4,114
Total liabilities		5,712,367			5,093,045
Stockholders' equity
Vu1 Corporation's stockholders' equity (deficit)
Preferred stock, $1.00 par value; 10,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock, no par value; 90,000,000 shares authorized; 7,130,226 and 5,568,253 shares issued and outstanding, respectively		78,279,737			74,898,008
Common stock, no par value; 90,000,000 shares authorized; 10,576,097 and 7,130,226 shares issued and outstanding, respectively		82,609,032			78,279,737
Accumulated deficit		(8388,~~406~~426,~~639~~616	)		(7983,~~581~~406,~~191~~639	)
Accumulated other comprehensive income		-			123,822
Total Vu1 Corporation's stockholders' deficit		(5,817,584	)		(5,126,902	)
Total Vu1 Corporation's stockholders' equity (deficit)		(5,126,902	)		(4,559,361	)
Non-controlling interest		(96,055	)		(96,055	)
Total stockholders' equity (deficit)		(5,222,957	)		(4,655,416	)
Total stockholders' deficit		(5,913,639	)		(5,222,957	)
Total liabilities and stockholders' equity	$	489,410		$	437,629
Total liabilities and stockholders' deficit	$	313,414		$	489,410

The accompanying notes are an integral part of these consolidated financial statements.

F - 3

Vu1 CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
		Years ended December 31,
			Year ended December 31,
		2012				2011
			2013				2012
Revenue		$	-			$	7,816
Operating expenses
Cost of revenue			-				47,357
Research and development			$	646,611			$	547,276
Gross profit			-				(39,541	)
General and administrative				1,692,010				1,538,312
Operating expenses
Marketing				374,806				755,307
Research and development			547,276				3,708,932
	Total operating expenses			2,713,427				2,840,895
General and administrative			1,538,312				3,329,469
Loss from operations				(2,713,427	)			(2,840,895	)
Marketing			755,307				984,115
Other income (expense)
Impairment loss			-				1,812,728
Interest income				-				19
Inventory write down			-				99,632
Interest expense				(1,191,786	)			(1,309,917	)
Total operating expenses			2,840,895				9,934,876
Loss on conversion of debt				(1,114,764	)			(353,161	)
Loss from operations			(2,840,895	)			(9,974,417	)
Loss on extinguishment of accounts payable				-				(63,473	)
Other income (expense)
Derivative valuation gain				-				592,783
Interest income			19				177
Gain on disposal of foreign subsidiary				-				149,196
Interest expense			(1,309,917	)			(605,247	)
				(2,306,550	)			(984,553	)
Derivative valuation gain			592,783				1,497,865
Loss before provision for income taxes				(5,019,977	)			(3,825,448	)
Loss on extinguishment of debt			(353,161	)			-
Provision for income taxes				-				-
Loss on extinguishment of accounts payable			(63,473	)			-
Net loss			$	(5,019,977	)		$	(3,825,448	)
Gain on disposal of foreign subsidiary			149,196				-
Other comprehensive (loss) income:
Total other income (expense)			(984,553	)			892,795
Foreign currency translation adjustments				-				25,374
Loss before provision for income taxes			(3,825,448	)			(9,081,622	)
Reclassification adjustment on disposal of foreign subsidiary				-				(149,196	)
Provision for income taxes			-				-
Comprehensive loss			$	(5,019,977	)		$	(3,949,270	)
Net loss		$	(3,825,448	)		$	(9,081,622	)
Loss per share
Other comprehensive income (loss):
Basic			$	(0.55	)		$	(0.64	)
Foreign currency translation adjustments			25,374				86,275
Diluted			$	(0.55	)		$	(0.64	)
Reclassification adjustment on disposal of foreign subsidiary			(149,196	)			-
Weighted average shares outstanding
Comprehensive loss		$	(3,949,270	)		$	(8,995,347	)
Basic				9,144,940				5,949,211
Loss per share
Diluted				9,144,940				5,949,211
Basic		$	(0.64	)		$	(1.64	)
Diluted		$	(0.64	)		$	(1.64	)
Weighted average shares outstanding
Basic			5,949,211				5,520,903
Diluted			5,949,211				5,520,903

The accompanying notes are an integral part of these consolidated financial statements.

F - 4

Vu1 CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2012
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
	Vu1 Corporation Stockholders
										Accumulated
										Other
	Common Stock						Accumulated			Comprehensive			Non-Controlling
	Shares			Amount			Deficit			Income			Interest			Total
Balance December 31, 2010		5,249,638		$	71,597,111		$	(70,499,569	)	$	37,547		$	(96,055	)	$	1,039,034
Share-based compensation - options		-			1,006,807			-			-			-			1,006,807
Share-based compensation - stock		40,625			339,924			-			-			-			339,924
Issuance of units of stock and warrants for cash		279,060			2,336,901			-			-			-			2,336,901
Derivative warrant liability		-			(2,090,648	)		-			-			-			(2,090,648	)
Issuance of stock and warrants for services		6,650			66,500			-			-			-			66,500
Issuance of stock for settlement		5,000			51,000			-			-			-			51,000
Forfeited stock grant		(2,206	)		-			-			-			-			-
Prior year forfeited stock grant		(10,895	)		-			-			-			-			-
Warrants issued with convertible notes		-			788,972			-			-			-			788,972
Warrants issued for loan costs		-			142,601			-			-			-			142,601
Beneficial conversion feature		-			658,840			-			-			-			658,840
Rounding due to reverse split		381			-			-			-			-			-
Net loss		-			-			(9,081,622	)		-			-			(9,081,622	)
Foreign currency translation adjustments		-			-			-			86,275			-			86,275
Balance December 31, 2011		5,568,253			74,898,008			(79,581,191	)		123,822			(96,055	)		(4,655,416	)
Share-based compensation - options		-			134,349			-			-			-			134,349
Share-based compensation - stock		168,500			311,336			-			-			-			311,336
Issuance of units of stock and warrants for cash		932,365			1,825,768			-			-			-			1,825,768
Issuance of stock for services		79,585			143,954			-			-			-			143,954
Issuance of stock and warrants for bridge note payable		55,267			546,593			-			-			-			546,593
Issuance of stock and warrants for accounts payable		262,000			374,750			-			-			-			374,750
Issuance of stock for accounts payable		64,256			44,979			-			-			-			44,979
Net loss		-			-			(3,825,448	)		-			-			(3,825,448	)
Foreign currency translation adjustments		-			-			-			25,374			-			25,374
Reclassification adjustment on disposal of foreign subsidiary		-			-			-			(149,196	)		-			(149,196	)
Balance December 31, 2012		7,130,226		$	78,279,737		$	(83,406,639	)	$	-		$	(96,055	)	$	(5,222,957	)
Share-based compensation - options		-			478,228			-			-			-			478,228
Share-based compensation - stock		454,216			631,139			-			-			-			631,139
Issuance of units of stock and warrants for cash		1,262,334			1,503,465			-			-			-			1,503,465
Issuance of stock for conversion of debenture		101,260			123,538												123,538
Issuances of stock and warrants for conversion of ST Debt		73,333			139,020												139,020
Amendment of Unit Offering		1,186,567			-			-			-			-			-
Issuance of stock and warrants for bridge note payable		368,161			1,453,905			-			-			-			1,453,905
Net loss		-			-			(5,019,977	)		-			-			(5,019,977	)
Balance December 31, 2013		10,576,097		$	82,609,032		$	(88,426,616	)	$	-		$	(96,055	)	$	(5,913,639	)

The accompanying notes are an integral part of these consolidated financial statements.

F - 5

Vu1 CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
	Years ended December 31,
	Year ended December 31,
	2012			2011
	2013			2012
Cash flows from operating activities:
Net loss	$	(35,~~825~~019,~~448~~977	)	$	(93,~~081~~825,~~622~~448	)
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation		13,~~740~~402			981,~~719~~740
Share-based compensation		~~134~~1,~~349~~109,367			1589,~~006,807~~639
Issuance of stock for services		455,290			339,924
Amortization of discount on long-term convertible notes		571,254			1,031,098
Amortization of discount and prepaid interest on notes payable		1,032,584			461,724
Amortization of loan costs		118,500			223,230
Amortization of loan costs		223,230			130,107
Amortization of prepaid interest		25,000			1,486
Derivative valuation gain		~~(592,783~~-	)		(1592,~~497,865~~783	)
Loss on extinguishment of debt		~~353~~1,~~160~~114,764			-353,160
Loss on extinguishment of accounts payable		~~63,473~~-			-63,473
Gain on disposal of foreign subsidiary		~~(149,196~~-	)		-(149,196	)
Impairment loss and inventory write down		-			1,812,728
Inventory allowance		-			99,632
Changes in assets and liabilities:
Accounts receivable		~~3,616~~-			(3,616	)
Inventory		-			(99,632	)
Prepaid expenses		(172,283	)		9,083
Tax refund receivable		-			(23,888	)
Accounts payable		260,971			631,223
Prepaid expenses		9,083			27,800
Accrued payroll		-			90,898
Accounts payable		631,223			632,176
Accrued interest		272,396
Accrued payroll		90,898			316,940
Net cash flows from operating activities		(1,716,606	)		(1,568,781	)
Net cash flows from operating activities		(1,568,781	)		(5,780,066	)
Cash flows from investing activities:
Purchases of equipment and construction in process		-			(20,816	)
Purchase of equipment		(34,015	)		-
Deposits on building purchase		-			(243,331	)
Net cash flows from investing activities		(34,015	)		-
Net cash flows from investing activities		-			(264,147	)
Cash flows from financing activities:
Proceeds from sales of common stock and warrants		1,825,768			2,336,901
Net proceeds from sales of common stock and warrants		1,503,465			1,825,768
Proceeds from issuance of short term notes payable		100,000			-
Payment on convertible debenture		(88,237	)		-
Proceeds from issuance of convertible notes payable and warrants		-			3,500,000
Proceeds from loan payable		100,000			100,000
Cash paid for loan costs and prepaid interest		~~(40,000~~-	)		(~~298~~40,~~500~~000	)
Proceeds from issuance of bridge notes		-			475,000
Net cash flows from financing activities		1,515,228			1,885,768
Payments on loan payable		-			(2,310	)
Effect of exchange rate changes on cash		-			209
Payments on capital lease obligations		-			(3,986	)
Net change in cash		(235,393	)		317,196
Net cash flows from financing activities		1,885,768			6,007,105
Cash, beginning of period		328,188			10,992
Effect of exchange rate changes on cash		209			(71,519	)
Cash, end of period	$	92,795		$	328,188
Net change in cash		317,196			(108,627	)
Cash, beginning of period		10,992			119,619
Cash, end of period	$	328,188		$	10,992
Supplemental Cash Flow Information:
Cash paid for interest	$	~~25,000~~-		$	~~2,203~~-
Supplemental Non-Cash Investing and Financing Activities:
Supplemental Noncash Investing and Financing Activities:
Conversion of Bridge Loan to Common Stock and Warrants	$	193,431		$	-
Conversion of bridge loan and interest to stock and warrants	$	1,453,905		$	193,431
Issuance of Common Stock and Warrants for Accounts Payable	$	356,256		$	-
Conversion of debenture for stock	$	123,538		$	-
Issuance of common stock and warrants for note payable and interest	$	110,000		$	-
Issuance of common stock and warrants for accounts payable	$	-		$	356,256

The accompanying notes are an integral part of these consolidated financial statements.

F - 6

Vu1 CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BUSINESS AND ORGANIZATION

General

All references in these consolidated financial statements to “we,” “us,” “our,” and the “Company” are to Vu1 Corporation, Sendio, s.r.o., our former Czech Republic based subsidiary, and our inactive subsidiary Telisar Corporation, unless otherwise noted or indicated by its context.

We are focused on designing, developing and selling a line of mercury free, energy efficient lighting products based on our proprietary light-emitting technology. For the past several years, we have primarily focused on research and development efforts for our technology and the related manufacturing processes.

In September 2007, we formed Sendio, s.r.o. (“Sendio”) in the Czech Republic as a wholly-owned subsidiary for the purpose of operating a research and development and manufacturing facility. As discussed in Note ~~2, 6 and~~ 13, the Company ~~has~~ ceased the operations of Sendio ~~effective on February 13, 2012~~ and, asfiled a ~~result~~petition ~~has recognized an impairment~~ of ~~all~~insolvency ofeffective ~~its~~on ~~long~~February ~~term assets and inventory during the year ended December 31~~13, ~~2011~~2012.

We have one inactive subsidiary, Telisar Corporation, a California corporation and 66.67% majority-owned subsidiary.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Vu1 and all of its wholly-owned and controlled subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

Translating Financial Statements

The functional currency of Sendio iswas the Czech Koruna (CZK). The accounts of Sendio contained in the accompanying consolidated balance sheets as of December 31, ~~2012~~2013 and ~~2011~~2012 have been translated into United States dollars at the exchange rate prevailing as of those dates. Translation adjustments ~~are~~were included in “Accumulated Other Comprehensive Income,” a separate component of stockholders’ equity. The accounts of Sendio in the accompanying consolidated statements of operations for the years ended December 31, 2012 and 2011 have been translated using the average exchange rates prevailing for the respective periods. Sendio recorded an aggregate of $0 and ($19,894) of foreign currency transaction loss as general and administrative expense in the accompanying statements of operations for the years ended December 31, 2012 and 2011, respectively. During the year ended December 31, 2012 we recognized the balance of Accumulated Other Comprehensive Income of $149,~~196~~146 as a gain on liquidation of foreign subsidiary in the accompanying statement of operations for the year ended December 31, 2012 as we no longer have an ongoing investment in a foreign subsidiary.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statements of cash flows, we consider all investments purchased with original maturities of three months or less to be cash equivalents. At December 31, ~~2012~~2013 we have ~~$78,188~~no of cash in excess of federal insurance limits.

F - 7

Equipment

Equipment is comprised of equipment used in the testing and development of the manufacturing process for our lighting products and is stated at cost. We provide for depreciation using the straight-line method over the estimated useful lives of three to five years. Expenditures for maintenance and repairs are charged to operations as incurred while renewals and betterments are capitalized. Gains or losses on the sale of equipment are reflected in the statements of operations.

F - 7

Income Taxes

We recognize the amount of income taxes payable or refundable for the current year and recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement amounts of certain assets and liabilities and their respective tax bases. Deferred tax assets and deferred tax liabilities are measured using enacted tax rates expected to apply to taxable income in the years those temporary differences are expected to be recovered or settled. A valuation allowance is required when it is less likely than not that we will be able to realize all or a portion of our deferred tax assets.

FASB ASC 740-10-25 clarifies the accounting for uncertain tax positions and requires that an entity recognizes in the consolidated financial statements the impact of a tax position, if that position is more likely than not of being sustained upon examination, based on the technical merits of the position. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company has elected to classify interest and penalties related to unrecognized tax benefits, if and when required, as part of income tax expense in the consolidated statements of operations.

Loan Costs

Loan costs are amortized to interest expense using the straight line method, which approximates the effective interest method, over the life of the related loans.

Long-Lived Assets

Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount that the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Management reviewed the assets at December 31, ~~2012~~2013 and determined there was no impairment. Management reviewed the assets at December 31, 2011 and determined that the long-lived assets of Sendio were fully impaired as further discussed in Note 13. As a result of this determination, we recognized an impairment loss for the year ended December 31, 2011 related to Sendio’s long term assets as follows:

	Year Ended December 31,
	2011
Equipment	$	215,283
Construction in process		288,570
Deposit on building purchase		1,308,875
Total impairment loss	$	1,812,728

Fair Value of Financial Instruments

Financial instruments consist of cash, ~~receivables,~~ payables and accrued liabilities, ~~derivative financial instruments,~~ loans payable, bridge loans and convertible ~~debt~~debentures. The fair value of our cash, receivables, payables and accrued liabilities and loans payable are carried at historical cost; their respective estimated fair values approximate their carrying values due to the short term nature of these items. It is not practical to determine the fair value of our convertible debentures due to the unique terms and embedded financial instruments.

FDerivative financial instruments, as defined in ASC 815 “Accounting for Derivative Financial Instruments and Hedging Activities” consist of financial instruments or other contracts that contain a notional amount and one or more underlying (e.g., interest rate, security price or other variable), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing 8or embedded in other financial instruments. We generally do not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks.

Derivative financial instruments, as defined in ASC 815 “Accounting for Derivative Financial Instruments and Hedging Activities” consist of financial instruments or other contracts that contain a notional amount and one or more underlying (e.g., interest rate, security price or other variable), require no initial net investment and permit net settlement. Derivative financial instruments may be free-standing or embedded in other financial instruments. We generally do not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the conversion feature in our convertible promissory notes is not afforded equity classification because it embodies risks not clearly and closely related to the host contract. As required by ASC 815-10, these features are required to be bifurcated and carried as derivative liabilities, at fair value, in our financial statements.

We carry our long term convertible debt at historical cost. The fair value of our convertible debt in its hybrid form is determined, for disclosure purposes only, based upon its forward cash flows, at credit risk adjusted rates, plus the fair value of the conversion feature. The fair value of our convertible debentures is $3,962,307 at December 31, 2012 based on the present value of the future cash flows of the instrument.

Fair Value Measurements

ASC 820 “Fair Value Measurements” defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This hierarchy prioritizes the inputs into three broad levels. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. Significant fair value measurements resulted from the application of ASC 815 to our convertible promissory note and warrant financing arrangements and ASC 718-10 for our share-based payment arrangements. ~~We used level 3 inputs to measure fair value of these instruments.~~

F - 8

Non-Controlling Interest

Non-controlling interest represents the equity of the 33.3% non-controlling shareholders of Telisar Corporation. The subsidiary had no operations during ~~2012~~2013 and ~~2011~~2012.

Revenue Recognition

Revenues are recognized when (a) persuasive evidence of an arrangement exists, (b) delivery has occurred and no significant obligations remain, (c) the fee is fixed or determinable and (d) collection is determined to be probable.

Research and Development Costs

For financial reporting purposes, all costs of research and development activities performed internally or on a contract basis are expensed as incurred. For the years ended December 31, ~~2012~~2013 and ~~2011~~2012, research and development expenses were comprised primarily of technical consulting expenses, salaries and related benefits and overheads, travel, rent and operational costs related to the development of the production line.

Share-Based Payments

We account for share-based compensation expense to reflect the fair value of share-based awards measured at the grant date. This expense is recognized over the requisite service period and is adjusted each period for anticipated forfeitures. We estimate the fair value of each share-based award on the date of grant using the Black-Scholes option valuation model. The Black-Scholes option valuation model incorporates assumptions as to stock price volatility, the expected life of options, a risk-free interest rate and dividend yield. On October 26, 2007 our Board of Directors approved the Vu1 Corporation 2007 Stock Incentive Plan (the “Stock Incentive Plan”). A total of 500,000 shares of our common stock were authorized for issuance under the Stock Incentive Plan. The Stock Incentive Plan was approved by our stockholders on May 22, 2008. On March 14, 2011, our Board of Directors increased the number of shares of our common stock that we are authorized to issue under our Stock Incentive Plan from 500,000 shares to 1,000,000 shares. A majority of our stockholders approved the amendment to the Stock Incentive Plan on October 10, 2011. On August 26, 2013 the board of directors increased the number of shares authorized for issuance under the 2007 Stock Incentive Plan by 1,500,000 shares to a total of 2,500,000 shares. See Note 1110.

F - 9

Comprehensive Income

Comprehensive income includes all changes in equity (net assets) during a period from non-owner sources. Other comprehensive income presented in the accompanying consolidated financial statements consists of foreign currency translation adjustments and a reclassification on disposal of foreign subsidiary.

Loss Per Share

We calculate basic loss per share by dividing loss available to common stockholders by the weighted-average number of shares of common stock outstanding, excluding unvested stock. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common shares, including unvested stock, had been issued and if the additional common shares were dilutive.

F - 9

The following potentially dilutive common shares are excluded from the computation of diluted net loss per share for all periods presented because the effect is anti-dilutive due to our net losses:

	Years ended December 31,
	Year ended December 31,
	2012		2011
	2013		2012
Warrants		24,~~012~~772,~~034~~228		~~921~~2,~~963~~012,034
Convertible debt		~~374~~1,~~346~~152,223		374,346
Stock options		~~309~~595,~~004~~088		~~591~~309,~~181~~004
Unvested stock		~~168~~319,~~500~~231		7168,~~529~~500
Total potentially dilutive securities		26,~~863~~838,~~884~~770		12,~~895~~863,~~019~~884

Recently Announced Accounting Standards – In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). This update requires companies to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, unless certain conditions exist. ASU 2013-11 became effective for interim and annual periods beginning after December 15, 2013, with early adoption permitted. The Company will adopt ASU 2013-11 when required in the first quarter of 2014. The Company does not believe the impact of ASU 2013-11 will have a material effect on the Company’s consolidated financial statements or on its financial condition.

ASU 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment, permits, but does not require, an entity to conduct an initial qualitative assessment to determine whether it is more likely than not that a non-goodwill indefinite-lived asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test currently required (i.e., comparing the asset's fair value with its carrying amount). This new standard was adopted by the Company on September 30, 2012 and had no significant effect on the accompanying consolidated financial statements.

ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, requires disclosures about assets and liabilities that are offset or have the potential to be offset. This new guidance was effective for reporting periods beginning January 1, 2013, with retrospective application required. The adoption of this guidance did not have a material impact on the Company’s results of operations, financial position or disclosures.

NOTE 3 - GOING CONCERN MATTERS

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States which contemplate our continuation as a going concern. For the year ended December 31, ~~2012~~2013, we had a net loss of $35,~~825~~019,~~448~~977 and we had negative cash flows from operations of $1,~~568~~717,~~781~~606. In addition, we had an accumulated deficit of $8388,~~406~~426,~~639~~616 at December 31, ~~2012~~2013. These factors raise substantial doubt about our ability to continue as a going concern.

Recovery of our assets is dependent upon future events, the outcome of which is indeterminable. Our attainment of profitable operations is dependent upon obtaining adequate financing and achieving a level of sales adequate to support our cost structure. In addition, realization of a significant portion of the assets in the accompanying balance sheet is dependent upon our ability to meet our financing requirements and the success of our plans to sell our product. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to continue in existence.

Subsequent to year end, we raised gross proceeds of $~~105~~150,000 in a private placement of our common stock and warrants to accredited investors. See Note 14.

NOTE 4 –- ~~TAX~~RELATED ~~REFUND~~PARTY ~~RECEIVABLE~~ TRANSACTIONS

~~Tax~~During ~~refund~~the ~~receivable~~year ~~represents~~ended ~~the~~December ~~19%~~31, ~~value~~2013 ~~added~~we ~~tax~~issued ~~receivable~~48,842 ~~from~~shares ~~the~~of ~~government~~common ofstock ~~the~~with ~~Czech~~a ~~Republic~~fair atvalue ~~December~~of 31$75,000 ~~2011~~to SAM Advisors, LLC. No ~~allowance~~The ~~for~~issuances ~~doubtful~~were ~~accounts~~based ~~has~~on ~~been~~the ~~provided~~closing asmarket weprices ~~believe~~as of the ~~amounts~~date ~~are~~of ~~fully~~issuance ~~collectible. There~~pursuant isto noour ~~amount~~agreement atto ~~December~~convert 31their $12,500 ~~2012~~monthly ~~due~~consulting fee to stock at the ~~insolvency~~closing market price on the last business day of ~~Sendio~~each ~~during~~month. ~~2012~~SAM Advisors, Inc. is an entity controlled by William B. Smith, our chairman and chief executive officer.

F - 10

~~NOTE~~During 5the -year ~~RELATED~~ended ~~PARTY~~December ~~TRANSACTIONS~~31, 2013 we issued 6,143 shares of common stock with a fair value of $11,250 to Charles Hunt, a member of our board of directors. The issuances were based in the closing market prices as of the date of issuance pursuant to our agreement to convert $3,750 of his monthly consulting fee to stock at the closing market price on the last business day of each month.

During the year ended December 31, 2012 we paid consulting fees of $125,000 to SAM Advisors, LLC for services rendered to the Company. In addition, From August 31, 2012 to December 31, 2012 we issued 56,208 shares of common stock with a fair value of $62,500 to SAM Advisors, LLC pursuant to our agreement with SAM to convert their monthly fee to common stock at the price of our common stock on the last day of each month. SAM Advisors LLC is owned by William B. Smith, our Chairman and chief executive officer.

~~Two~~During the year ended December 31, 2012, two of our board members invested $105,000 and $15,000 in our unit private placement as discussed in Note 1110.

~~One~~During the year ended December 31, 2012, one of our board members converted a loan totaling $57,385 (including $7,385 of accrued interest and loan fees) into 16,396 shares of our common stock, three year warrants to purchase 16,396 shares of our common stock at an exercise price of $3.75 per share and three year warrants to purchase 16,429 shares of our common stock at an exercise price of $11.00 per share as discussed in Note 87.

During the year ended December 31, 2012 we paid fees of $22,382 to Duncan Troy for services rendered as the managing director of Sendio. Mr. Troy is a member of our board of directors.

InNOTE ~~June~~5 ~~2011,~~- weCOMMITMENTS ~~paid~~AND ~~a consulting fee of $50,000 to SAM Advisors, LLC for services rendered to the Company. SAM Advisors LLC is owned by William B. Smith, our Chairman.~~CONTINGENCIES

InOperating ~~August 2011, we paid $25,000 to William B. Smith, our Chairman and $25,000 to Greg Owens, then a director, for consulting services rendered to the Company.~~Leases

InOn ~~November~~December 18, ~~2011~~2012 we ~~received~~entered ~~$50,000~~into ~~from~~a ~~Mark~~6 W.month ~~Weber~~lease for office space in New York, aNew ~~member~~York. ofThis ~~our~~lease ~~board~~was ofextended ~~directors~~to inDecember ~~exchange~~31, ~~for~~2013 on the ~~issuance~~same ofterms. aMonthly ~~bridge~~rental ~~note~~payments asare ~~discussed~~$2,035. The inlease ~~Note~~was 8terminated by its terms as of that date.

In September 2010, we entered into an agreement with Integrated Sales Solutions II, LLC (“ISS”) to enhance our capabilities in designing and establishing sales strategy and distribution channels with retail, electrical utilities, electrical distributors and government agencies. ISS became a related party to us upon the appointment of Bill K. Hamlin to our board of directors in October, 2010. Mr. Hamlin is the Chief Executive Officer of ISS. In April 2011, we entered into an agreement with Hamlin Consulting, LLC to advise and assist us in defining logistics, warehousing, finished goods requirements, distribution, packaging, merchandising and support for our ESL bulbs. ISS and Hamlin Consulting are owned by Bill K. Hamlin, a former director of our company and our former President and Chief Operating Officer. We paid $13,268 and $144,000 to ISS and $45,000 and $180,000 to Hamlin Consulting for the years ended December 31, 2012 and 2011, respectively.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

Sendio Facility Operating Lease and Purchase Agreement

On May 28, 2008, Sendio entered into a lease contract for certain facilities located in the city of Olomouc in the Czech Republic. On December 2, 2009, Sendio executed a new lease agreement (the “Lease Agreement”) for its existing office and manufacturing facilities in the Czech Republic. The New Lease Agreement commenced on December 1, 2009 and specifies annual rent of CZK 13,365,000 plus applicable VAT taxes (CZK 1,113,750 per month), less amounts paid by existing tenants in the building. The rent was CZK 719,556 per month after offset of the amounts paid by existing tenants and would increase should the existing tenants vacate the premises by the amount paid by the vacating tenant. The Lease Agreement expired on June 30, 2011. On June 22, 2011, Sendio s.r.o. amended the lease agreement (the “New Lease Agreement”), dated December 2, 2009, for its former office and manufacturing facilities located in the city of Olomouc in the Czech Republic. The amendment extended the termination date of the lease from June 30, 2011 to June 30, 2013. There were no changes in the rent to be paid for the facilities. The annual rent remains CZK 13,365,000, plus applicable VAT taxes (CZK 1,113,750 per month), less amounts paid by existing tenants in the building. The rent was CZK 719,556, plus applicable VAT taxes per month after offset of the amounts paid by existing tenants, and would increase if the existing tenants vacate the premises by the amount paid by the vacating tenant. Our rent increased on September 1, 2011 by CZK 357,633 to CZK 1,074,189 due to an existing tenant vacating the premises. Sendio was responsible for utilities, maintenance and certain other costs as defined in the New Lease Agreement.

F - 11

Effective December 9, 2008, Sendio entered into an agreement (the “Purchase Agreement”) to purchase the facilities in the lease from the landlord. The purchase price for the Premises was CZK 179,000,000 (approximately $9.0 million USD) (the “Purchase Price”). A deposit Sendio paid on May 29, 2008 for CZK 4,000,000 was considered an advance on the Purchase Price. We recorded this amount as a non-current asset as a deposit on building purchase in the accompanying balance sheet as of December 31, 2010. The remaining balance of the Purchase Price was payable by means of an escrow account, with payments totaling CZK 175,000,000 originally scheduled to be made to an escrow account in installments, all of which were originally due June 30, 2009.

Also effective December 9, 2008, as additional inducement for the landlord to enter into the Purchase Agreement, Vu1 entered into a Deed of Guarantee with the landlord under which it guaranteed up to CZK 13,500,000 of the CZK 175,000,000 aggregate payments by Sendio under the Purchase Agreement. The guarantee expired upon full payment by Sendio of this amount.

On June 22, 2011, Sendio amended and restated the Purchase Agreement, effective December 9, 2008 and amended March 3, 2009 and December 2, 2009 (the “Purchase Agreement”), for the same facilities with Milan Gottwald (“Mr. Gottwald”), the owner. Under the Purchase Agreement, Sendio has made installment payments totaling CZK 23,084,224 into an escrow account through December 31, 2011 to be applied against the total purchase price of CZK 179,000,000. This amount was originally recorded as a Deposit on building purchase on the accompanying balance sheet. As discussed in Notes 2 and 13, we reviewed our long-term assets for impairment effective December 31, 2011 and determined that the value of these deposits was impaired.

Also in conjunction with the Purchase Agreement, we issued 15,000 shares of our common stock valued at $135,000 based on the closing market price on the effective date of the agreement of $9.00 per share, to Mr. Gottwald. This amount has been recorded as general and administrative expenses in the accompanying statement of operations for the year ended December 31, 2011.

Our lease for the premises was terminated effective March 15, 2012 and our obligation to acquire the building was terminated on February 8, 2012 in conjunction with the insolvency of Sendio, sro as discussed in Note 13.

Other Operating Leases

On July 11, 2011 we entered into a month to month lease agreement for office space in New Hampshire. Monthly rental payments were $1,445 under the lease. This lease was terminated in April, 2012.

OnTotal ~~December~~rent ~~18,~~expense ~~2012~~was we$24,647 ~~entered~~and ~~into~~$9,859 ~~a 6 month lease~~ for ~~office~~the ~~space~~years inended ~~New~~December ~~York~~31, ~~New~~2013 ~~York. Monthly~~and ~~rental payments are $2~~2012,~~035~~ respectively.

~~Total~~Subsequent ~~rent~~to ~~expense~~December ~~was $9~~31,~~859~~ ~~and~~2013 ~~$593,918~~the ~~for~~Company ~~the~~entered ~~years~~into ~~ended~~a ~~December~~lease ~~31,~~for ~~2012~~a research and ~~2011,~~development ~~respectively~~facility in the United States. See Note 14.

The future payments under the New York lease as of December 31, 2012 are $12,210 for the year ended December 31, 2013.

Investment Banking Agreements

On June 7, 2011, we entered into an agreement with Rodman & Renshaw, LLC to act as our exclusive placement agent for the sale of securities on June 22, 2011 ~~as described in Note 11~~. The agreement specified cash compensation of 7% of the purchase price paid in an offering plus warrants equal to 7% of common shares issued or issuable under the offering on the same terms as offered to investors in the private placement. In addition, cash compensation of 7% of any proceeds from the exercise of warrants issued in conjunction with a private placement will be paid. The agreement terminated on July 21, 2011. The contingent obligation for fees and warrants ~~survives~~terminated ~~for~~on 18January ~~months~~21, ~~for proceeds raised from investors in the private placement~~2013.

On January 24, 2011, we entered into an agreement with Rodman & Renshaw, LLC to act as our exclusive placement agent for the sale of securities on February 8, 2011 ~~as described in Note 11~~. The agreement specified cash compensation of 7% of the purchase price paid in an offering plus warrants equal to 7% of common shares issued or issuable under the offering on the same terms as offered to investors in the private placement. In addition, cash compensation of 7% of any proceeds from the exercise of warrants issued in conjunction with a private placement will be paid. The agreement terminated 30 days after a successful private placement. The contingent obligation for fees and warrants ~~survives~~terminated ~~for 18 months for proceeds raised from investors~~ in ~~the private placement~~2012.

F - 1211

NOTE 76 – CONVERTIBLE DEBENTURES

On June 22, 2011, pursuant to a Securities Purchase Agreement, dated as of June 16, 2011, with several institutional investors, we completed a private placement of our original issue discount convertible debentures (referred to as the convertible debentures), receiving gross proceeds of $3,500,000. Each convertible debenture was issued at a price equal to 85% of its principal amount. The convertible debentures ~~mature~~matured on June 22, 2013, two years after the date of their issuance and dodid not bear regularly scheduled interest. Investors may convert their convertible debentures into shares of our common stock at any time and from time to time on or before the maturity date, at a conversion price of $11.00 per share.

The convertible debentures will mandatorily convert at our option into shares of our common stock at the conversion price, if the closing bid price for the common stock exceeds $30.00 per share for a period of 10 consecutive trading days, provided that such underlying shares have been fully registered for resale with the U.S. Securities and Exchange Commission (SEC).

The convertible debentures are unsecured, general obligations of our company, and rank pari passu with our other unsecured and unsubordinated liabilities. The convertible debentures are not redeemable or subject to voluntary prepayment by us prior to maturity. The convertible debentures ~~are~~were identical for all of the investors except for principal amount.

The investors agreed not to convert their convertible debentures or exercise their warrants, and we will not be permitted to require a mandatory conversion, to the extent such conversion, exercise or issuance would result in beneficial ownership of more than 4.99% of our outstanding shares at such time.

Events of default under the convertible debentures include:

•	failure to pay principal or any liquidated damages on any convertible debenture when due;

•	failure to perform other covenants under the convertible debentures that is not cured five trading days after notice by holders;

•	default under the other financing documents, subject to any grace or cure period provided in the applicable agreement, document or instrument;

•	certain events of bankruptcy or insolvency of our company or any significant subsidiary. The lender has waived this event of default with respect to the insolvency of Sendio.

•	any default by our company or any subsidiary under any instrument in excess of $150,000 that results in such obligation becoming due and payable prior to maturity;

•	we become party to a change of control transaction, or dispose of greater than 50% of our assets; and

•	failure to deliver common stock certificates to a holder prior to the tenth trading day after a convertible debenture conversion date.

Upon an event of default, the outstanding principal amount of the convertible debentures, plus a default premium, shall become immediately due and payable to the holders of the convertible debentures.

The convertible debentures contain various covenants that limit our ability to:

•	incur additional indebtedness, other than permitted indebtedness as defined in the convertible debenture;

•	incur specified liens, other than permitted liens as defined in the convertible debenture;

•	amend our certificate of incorporation or by-laws in a material adverse manner to the holders; and

•	repay or repurchase more than a de minimus number of shares of our common stock.

F - 1312

As part of the financing, we also agreed not to undertake a reverse or forward stock split or reclassification of our common stock until the one-year anniversary of the closing date, except with the consent of a majority in interest of the holders or in connection with an up-listing of our common stock onto a trading market other than the OTC Bulletin Board.

We also issued to the investors five-year warrants to purchase up to 187,175 shares of our common stock at an exercise price of $13.00 per share. The warrants may be exercised on a cashless basis at any time after the earlier of (i) one year after the date of their issuance or (ii) the completion of the applicable holding period required by Rule 144 in the event the underlying shares have not been fully registered for resale with the SEC. The warrants are not callable. Neither the warrants nor the convertible debentures contain a provision for anti-dilution adjustments in the event of a subsequent equity financing at a price less than the respective warrant exercise price or convertible debenture conversion price.

Pursuant to a Registration Rights Agreement, dated as of June 16, 2011, with the investors, we agreed to file a shelf registration statement covering the resale of the shares of common stock issuable upon the conversion of the convertible debentures and exercise of the warrants within 30 days after the closing, use our best efforts to cause the shelf registration statement to be declared effective within 90 days after the closing (or 120 days in the event of a “full review” by the SEC), and keep the shelf registration statement effective until the underlying shares have been sold or may be sold without volume or manner of sale restrictions pursuant to Rule 144 under the Securities Act of 1933 and if we are unable to comply with this covenant, we will be required to pay liquidated damages to the investors in the amount of 1.5% of the investors’ purchase price per month during such non-compliance (capped at a maximum of 10% of the purchase price), with such liquidated damages payable in cash. We filed the registration statement on July 15, 2011 and it was declared effective on July 26, 2011. We evaluated any liability under the registration rights agreement at December 31, ~~2012~~2013 and determined no accrual was necessary.

Effective June 22, 2013, the Company entered into a letter agreement with holders of $2,553,000 in principal amount of the Debentures. The ~~carrying~~maturity ~~value~~date atof ~~December~~these 31Debentures was extended to June 23, ~~2012~~2014 and ~~2011~~the ~~and~~conversion ~~June~~price 22was reduced from $11.00 to $2.50 per share. In addition, ~~2011~~these ~~(inception)~~Debentures will bear interest at an annual rate of 10% per annum, payable in equal installments on the ~~convertible~~six ~~debentures~~month isand asone ~~follows:~~year anniversary of the letter agreement.

	December 31, 2012			December 31, 2011			June 22, 2011 (Issue Date)
Face amount	$	4,117,750		$	4,117,750		$	4,117,750
Original issue discount		(155,443	)		(465,072	)		(617,750	)
		3,962,307			3,652,678			3,500,000
Beneficial conversion feature and warrant allocation		(415,811	)		(1,138,766	)		(1,447,812	)
Carrying value	$	3,546,496		$	2,513,912		$	2,052,188

Also, effective June 22, 2013, the Company entered into a separate letter agreement with the holder of approximately $123,538 in principal amount of the Debentures to reduce the conversion price of these Debentures from $11.00 to $1.22 per share. This holder then converted the principal amount of their Debentures into 101,260 shares of common stock.

~~The~~We ~~original~~evaluated ~~issue~~the ~~discount~~amended ofdebentures ~~the~~above ~~convertible~~to ~~debentures~~determine isif ~~being~~there ~~amortized~~was ~~over~~an ~~their~~extinguishment ~~two-year~~of ~~life~~debt ~~using~~or beneficial conversion feature arising as a result of the ~~effective~~amendments ~~interest~~and ~~method~~determined there was none.

On June 22, 2013, the Company did not make the required payment on the remaining $1,441,213 in principal amount of the Debentures described above, which constitutes an event of default under the terms of the remaining original Debentures. As a result, the Company recorded a penalty of 10% of the principal amount of $144,121 as interest expense on the accompanying statement of operations for the year ended December 31, 2013. The Company is also liable for all other amounts, costs, expenses and liquidated damages due in respect of those Debentures. Additionally, the remaining original Debentures will bear default interest at a rate of 18% per annum. As a result of the Debentures being past due, the investors may at any time exercise their remedies under the terms of the Debentures.

The carrying value at December 31, 2013 and 2012 of the convertible debentures is as follows:

	December 31, 2013		December 31, 2012
Debentures Due June 22, 2013, in default at December 31, 2013, interest at 18%	$	1,352,975	$	4,117,750
Debentures Due June 23, 2014, interest at 10%		2,553,000		-
Original issue discount		-		(155,443	)
		3,905,975		3,962,307
Beneficial conversion feature and warrant allocation		-		(415,811	)
Carrying value	$	3,905,975	$	3,546,496

F - 13

The original issue discount of the convertible debentures was amortized over their two-year life using the effective interest method.

The proceeds were first allocated between the convertible debentures and the warrants based upon their relative fair values. The estimated fair value of the warrants issued with the convertible debentures of $1,018,582 was calculated using the Black-Scholes option pricing model and the following assumptions: market price of common stock – $9.00 per share; estimated volatility – 84.6%; risk-free interest rate – 1.58%, expected dividend rate – 0% and expected life – 5.0 years. This resulted in allocating $788,972 to the warrants and $2,711,028 to the convertible debentures.

Next, the intrinsic value of the beneficial conversion feature was computed as the difference between the fair value of the common stock issuable upon conversion of the convertible debentures and the total price to convert based on the effective conversion price. This resulted in allocating $658,840 to the beneficial conversion feature. The resulting $1,447,812 discount to the convertible debentures is being amortized over the two-year term of the convertible debentures using the effective interest method.

In conjunction with the placement of the convertible debentures, we paid our investment banker $245,000 as a placement fee and issued five-year warrants to purchase 26,205 shares of our common stock at an exercise price of $13.00 per share. All terms are identical to the warrants issued to the holders of the convertible debentures. The estimated fair value of the warrants issued with the convertible debentures of $142,601 was calculated using the Black-Scholes option pricing model and the following assumptions: market price of common stock – $9.00 per share; estimated volatility – 84.6%; risk-free interest rate – 1.58%, expected dividend rate – 0% and expected life – 5.0 years. In addition, we incurred legal and other costs of $53,500 paid in cash. These costs, totaling $441,101 were recorded as loan costs on the accompanying balance sheet on the date of issuance and ~~are~~were ~~being~~ amortized to interest expense using the straight line method, which approximates the effective interest method, over the two-year term of the convertible debentures.

F - 14

Interest expense related to the convertible debentures is as follows:

	Year Ended December 31,
	Year ended December 31,
	2012		2011
	2013		2012
Amortization of original issue discount	$	~~309~~155,~~628~~443	$	~~152~~309,~~679~~628
Amortization of beneficial conversion feature and warrant allocation		~~722~~415,~~956~~811		~~309~~722,~~045~~956
Amortization of loan costs		~~220~~104,~~852~~392		~~115~~220,~~857~~852
	$	1,253,436	$	577,581
Penalty interest payable in cash		144,121		-
Stated interest payable in cash		259,168		-
	$	1,078,935	$	1,253,436

NOTE 87 – CONVERTIBLE BRIDGE LOANS

In October and November 2011, we received $475,000 in gross proceeds from six existing stockholders in an interim bridge loan financing involving the issuance of 12% convertible promissory notes and warrants to purchase common stock. Included in the proceeds was $50,000 received from Mark W. Weber, a member of our board of directors. Under the notes, the loans are due upon the earlier of (a) the closing of financing pursuant to which shares of common stock or other equity securities are issued by us for aggregate consideration of not less than $5,000,000, through the (i) conversion of the note, including accrued interest, or (ii) at the lender’s option, repayment of the note, or (b) in any event, two years after the issuance of the note. The number of shares of common stock issuable upon conversion of the note will be based on a conversion price equal to a 15% discount to the price obtained in any round of equity financing. In the event we fail to repay the promissory notes on or before November 30, 2011, the note’s interest rate will be increased to 15% per annum. We did not pay the promissory notes prior to that date, and the interest rate was increased to 15% per annum. ~~Total interest expense for the years ending December 31, 2012 and 2011 was $54,103 and $25,463 (including $14,250 of loan costs), respectively.~~

Total interest expense for the year ending December 31, 2013 and 2012 was $7,027 and $54,103 (including $14,250 of loan costs in 2012), respectively.

In addition to interest on the promissory note, each note holder received a warrant to purchase the number of shares of common stock determined by dividing 115% of the principal amount of the note by the price at which our common stock is sold in any round of equity financing not less than $5,000,000, times 100%. The warrants will be exercisable at any time, commencing 90 days after the closing of the round of financing, and from time to time for a period of three years after the issuance date, at an exercise price of $11.00 per share (subject to appropriate adjustment in the event of any subsequent stock split or similar transaction).

F - 14

During February, 2013 three of the convertible bridge loans totaling $368,162 (including accrued interest and loan fees of $68,162) were converted into 368,162 shares of our restricted common stock, three year warrants to purchase 368,162 shares of our common stock at an exercise price of $1.50 per share and three year warrants to purchase 98,571 shares of our common stock at an exercise price of $11.00 per share. The fair value of the common stock was $662,690 based on the market prices of our common stock on the date of conversion of $1.80 per share. The fair value of the three year warrants to purchase 368,162 shares of our common stock at an exercise price of $1.50 per share was $633,121 and fair value of the three year warrants to purchase 98,571 shares of our common stock at an exercise price of $11.00 per share was $158,094. We recognized a loss on debt conversion for the year ended December 31, 2013 in the amount of $1,085,744.

The fair value of the warrants issued upon the conversions in 2013 was computed using the Black Scholes Option Pricing model using the following assumptions – expected life – 3 years, risk free interest rate – 0.82%, volatility – 227.1%, and an expected dividend rate of 0%.

During the year ended December 31, 2012, three of the convertible bridge loans totaling $193,431 (including accrued interest and loan fees of $18,431) were converted into 55,267 units in our private placement offering as discussed in Note 10. Accordingly, we issued 55,267 shares of our common stock, three year warrants to purchase 55,267 shares of our common stock at an exercise price of $3.75 per share and three year warrants to purchase 57,500 shares of our common stock at an exercise price of $11.00 per share. The fair value of the common stock was $230,540 based on the market prices of our common stock on the respective dates of conversion ranging from $2.11 to $5.75 per share. The fair value of the three year warrants to purchase 55,267 shares of our common stock at an exercise price of $3.75 per share was $171,023 and fair value of the three year warrants to purchase 57,500 shares of our common stock at an exercise price of $11.00 per share was $145,029. We recognized a loss on debt conversion in the amount of $353,161 on the dates of conversion for the notes.

The fair value of the warrants issued upon the conversions in 2012 was computed using the Black Scholes Option Pricing model using the following assumptions – expected life – 3 years, risk free interest rate – 0.31% to 0.82%, volatility – 103.6% to 198.4%, and an expected dividend rate of 0%.

One of the convertible bridge loans converted in 2012 was held by Mark Weber, a member of our board of directors, who converted a loan totaling $57,385 (including $7,385 of accrued interest and loan fees) into 16,396 shares of our common stock, three year warrants to purchase 16,396 shares of our common stock at an exercise price of $3.75 per share and three year warrants to purchase 16,429 shares of our common stock at an exercise price of $11.00 per share.

NOTE 8 – LOANS PAYABLE

On December 20, 2012, we received gross proceeds of $100,000 pursuant to the terms of a Loan Agreement dated December 20, 2012. The loan is secured by a deed of assignment for certain future inventory and proceeds from the sale of that inventory as described in the deed of assignment. The loan was payable on June 23, 2013, six months from the date of the agreement. We prepaid interest of $25,000 for the term of the loan and $15,000 for loan costs, which were amortized over the life of the note. We recognized $81,714 and $1,486 of interest expense and $23,514 and $892 for loan cost amortization within interest expense for the years ended December 31, 2013 and 2012, respectively.

On June 23, 2013 we did not repay the loan and it is in default. As a result of the default, the interest rate on the loan is 109.5% per annum from the date of default.

F - 15

~~During~~Total ~~the~~principal ~~year~~payments ~~ended~~for ~~December~~future ~~31,~~years ~~2012,~~for ~~three of~~ the ~~convertible~~Convertible ~~bridge~~Bridge ~~loans totaling $193~~Loans,~~431~~ ~~(including~~the ~~accrued~~Convertible ~~interest~~Debentures ~~and~~described ~~loan fees of $18,431) were converted into 55,267 units~~ in ~~our private placement offering as discussed in~~ Note ~~11. Accordingly~~7, we issued 55,267 shares of our common stock, three year warrants to purchase 55,267 shares of our common stock at an exercise price of $3.75 per share and three year warrants to purchase 57,500 shares of our common stock at an exercise price of $11.00 per share. The fair value of the ~~common~~Convertible ~~stock~~Bridge ~~was~~Loans ~~$230,540~~described ~~based~~in onNote ~~the~~7 market prices of our common stock on the respective dates of conversion ranging from $2.11 to $5.75 per share. The fair value of the three year warrants to purchase 55,267 shares of our common stock at an exercise price of $3.75 per share was $171,023 and ~~fair value of~~ the ~~three~~Loan ~~year~~Payable ~~warrants~~are toas ~~purchase~~follows ~~57,500~~as ~~shares~~ of ~~our~~December common stock at an exercise price of $11.00 per share was $145,029. We recognized a loss on debt conversion in the amount of $353,161 on the dates of conversion for the notes. The fair value of the warrants issued upon the conversion was computed using the Black Scholes Option Pricing model using the following assumptions – expected life – 3 years, risk free interest rate – 0.31~~% to 0.82%~~, ~~volatility – 103.6% to 198.4%, and an expected dividend rate of 0%.~~2013:

One of the convertible bridge loans converted was held by Mark Weber, a member of our board of directors, who converted a loan totaling $57,385 (including $7,385 of accrued interest and loan fees) into 16,396 shares of our common stock, three year warrants to purchase 16,396 shares of our common stock at an exercise price of $3.75 per share and three year warrants to purchase 16,429 shares of our common stock at an exercise price of $11.00 per share.

	December 31, 2013
2014		4,005,975
	$	4,005,975

On May 16, 2013 we received gross proceeds of $100,000 pursuant to a Loan Agreement as of that date. The ~~remaining~~term ~~bridge~~of ~~loans~~the ~~were~~loan was for 30 days. Total interest for the 30 day term was $10,000, which was recognized as interest expense for the year ended December 31, 2013. On June 18, 2013 the holder of the loan converted to$110,000 of principal and interest in our unit private placement as further described in Note 10 at a conversion price of $1.50 per share into 73,333 shares of common stock and three-year warrants ~~subsequent~~ to ~~year~~purchase ~~end~~common stock at an exercise price of $2.00 per share. ~~See~~The ~~Note~~fair 14value of the common stock was $95,333 based on the market prices of our common stock on the date of conversion of $1.30 per share. The fair value of the three year warrants to purchase 73,333 shares of our common stock at an exercise price of $2.00 per share was $43,687. We recognized a loss on conversion of debt for the year ended December 31, 2013 in the amount of $29,020.

~~NOTE~~The 9fair value of the warrants issued upon the conversion was computed using the Black Scholes Option Pricing model using the following assumptions – ~~LOAN~~expected ~~PAYABLE~~life – 3 years, risk free interest rate – 0.42%, volatility – 91.4%, and an expected dividend rate of 0%.

OnNOTE ~~December~~9 ~~20,~~– ~~2012,~~DERIVATIVE weFINANCIAL received gross proceeds of $100,000 pursuant to the terms of a Loan Agreement dated December 20, 2012. The loan is secured by a Deed of Assignment for certain inventory and all proceeds from the sale of the inventory. The loan is payable on June 23, 2013, six months from the date of the agreement. We prepaid interest of $25,000 for the term of the loan and $15,000 for loan costs, which are being amortized over the life of the note. We recognized $1,486 and $0 of interest expense and $892 and $0 for loan cost amortization within interest expense for the years ended December 31, 2012 and 2011, respectively. INSTRUMENTS

~~Total~~Derivative ~~principal~~financial ~~payments~~instruments ~~for~~were ~~future~~classified ~~years~~as ~~for~~liabilities ~~the~~and ~~Convertible~~carried ~~Bridge~~at ~~Loans,~~fair ~~the Convertible Debentures described in Note 7~~value, ~~the~~with ~~Convertible~~changes ~~Bridge~~reflected ~~Loans described~~ in ~~Note 8 and~~ the ~~Loan~~statement ~~Payable are as follows as~~ of ~~December 31, 2012:~~operations.

	December 31, 2012
2013		4,526,750
	$	4,526,750

On February 9, 2011, we issued five-year warrants to purchase 262,750 shares of our common stock at an exercise price of $12.00 per share in conjunction with a private placement. If we issued common stock or common stock equivalents at a price per share less than the exercise price of the warrants, the exercise price of the warrants was decreased to equal the price at which the common stock or common stock equivalents were issued. The exercise price could not be reduced below $9.00 per share. On June 22, 2011, the exercise price of the warrants was reduced from $12.00 per share to $11.00 per share as a result of the issuance of the convertible debentures at a conversion price of $11.00 per share as described in Note 6.

~~NOTE~~On January 24, 2012, the exercise price of the warrants was further reduced to $9.00 per share in conjunction with the 2012 Unit Offering as described in Note 10. As –a ~~DERIVATIVE~~result, ~~FINANCIAL~~we ~~INSTRUMENTS~~recognized the difference in the fair value of the warrants of $46,444 as of that date as an additional unrealized fair value change in the derivative gain for the year ended December 31, 2012. As a result of this reduction, the exercise price no longer has the potential for further adjustment, and we determined that the warrants no longer represented a derivative liability, and the remaining balance of the derivative liability was recognized as a derivative gain in the amount of $639,227 for the year ended December 31, 2012.

~~Derivative~~The ~~financial~~Company ~~instruments~~used ~~are~~the ~~classified~~Black-Scholes asoption ~~liabilities~~valuation ~~and~~model ~~carried~~to atmeasure the fair value, ~~with~~of ~~changes~~the ~~reflected~~warrants, inand based on the ~~statement~~following assumptions: market value of ~~operations~~common stock of $4.15, expected life of 4.04 years, volatility of 81.0% and risk free interest rate of 0.66%.

OnNOTE ~~February~~10 ~~9, 2011, we issued five~~-~~year~~ ~~warrants~~STOCKHOLDERS’ to purchase 262,750 shares of our common stock at an exercise price of $12.00 per share in conjunction with the private placement described in Note 11. If we issue common stock or common stock equivalents at a price per share less than the exercise price of the warrants, the exercise price of the warrants is decreased to equal the price at which the common stock or common stock equivalents were issued. The exercise price cannot be reduced below $9.00 per share. We determined that the potential adjustment to the exercise price of the warrants exceeded the economic dilution suffered and therefore the warrants are not to be considered indexed to our common stock and causes the warrants to be a derivative liability. Derivative financial instruments are classified as liabilities and carried at fair value at each reporting date, with changes reflected in the statements of operations.EQUITY

F - 16

On June 22, 2011, the exercise price of the warrants was reduced from $12.00 per share to $11.00 per share as a result of the issuance of the convertible debentures at a conversion price of $11.00 per share as described in Note 7. As a result, we recognized the difference in the fair value of the warrants of $39,503 as of that date as an additional unrealized fair value change in the derivative gain for the year ended December 31, 2011.

On January 24, 2012, the exercise price of the warrants was further reduced to $9.00 per share in conjunction with the private placement as described in Note 11. As a result, we recognized the difference in the fair value of the warrants of $46,444 as of that date as an additional unrealized fair value change in the derivative gain for the year ended December 31, 2012. As a result of this reduction, the exercise price no longer has the potential for further adjustment, and we determined that the warrants no longer represented a derivative liability, and the remaining balance of the derivative liability was recognized as a derivative gain in the amount of $639,227.

The following table summarizes the components of changes in our derivative warrant liability during the years ended December 31, 2012 and 2011:

	Years ended December 31,
	2012			2011
Beginning balance	$	592,783		$	-
Derivatives recognized upon issuance		-			2,090,648
Fair value change due to repricing, included in income		46,444			39,503
Unrealized fair value changes, included in income		(639,227	)		(1,537,368	)
Total unrealized gain, included in income		(592,783	)		(1,497,865	)
Ending balance	$	-		$	592,783

The Company uses the Black-Scholes option valuation model to measure the fair value of the warrants, and based on the following assumptions, a summary of the fair values are as follows:

	February 9, 2011			June 22, 2011			June 22, 2011			December 31, 2011			January 24, 2012
Exercise price	$	12.00		$	12.00		$	11.00		$	11.00		$	9.00
Trading market price	$	10.62		$	9.00		$	9.00		$	4.74		$	4.15
Expected life (years)		5.00			4.64			4.64			4.11			4.04
Equivalent volatility		102.90	%		82.80	%		82.80	%		89.20	%		81.0	%
Expected dividend rate		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Risk-free interest rate		2.33	%		1.58	%		1.58	%		0.60	%		0.66	%
Fair value	$	2,090,648		$	1,386,411		$	1,425,914		$	592,783		$	46,444

NOTE 11 - STOCKHOLDERS’ EQUITY

Preferred Stock

Our Amended and Restated Articles of Incorporation ~~allows~~allow us to issue up to 10,000,000 shares of preferred stock without further stockholder approval and upon such terms and conditions, and having such rights, preferences, privileges, and restrictions as the Board of Directors may determine. No preferred shares are currently issued and outstanding.

F - 16

Common Stock Issuances

2013 Unit Offerings

On January 25, 2013 we completed a private placement to accredited investors of 105,000 restricted shares of our common stock, at a purchase price of $1.00 per share, for gross proceeds of $105,000. As part of the private placement, the investors were issued three-year warrants to purchase 105,000 shares of our common stock, at an exercise price of $1.50 per share.

The net proceeds were allocated based on the relative fair values of the common stock and the warrants on the dates of issuance. The amount allocated to the fair value of the warrants was $52,363 and the balance of the proceeds of $52,637 was allocated to the common stock.

The fair value of the warrants issued in our unit private placement was calculated using the Black-Scholes option valuation model with the following assumptions – expected life – 3 years, risk free interest rate – 0.42%, volatility – 346.4%, and an expected dividend rate of 0%.

From April 9 to July 11, 2013 we raised gross proceeds of $871,000 in a unit private placement to accredited investors at a price of $1.50 per unit. Each unit is comprised of one share of common stock and one three-year warrant to purchase common stock at an exercise price of $2.00 per share. Included in the proceeds is $110,000 of principal and interest which was converted into the unit offering as described in Note 8. Also included is $10,000 received from a member of our board of directors. We issued an aggregate of 580,667 shares of common stock and warrants to purchase 580,667 shares of common stock at an exercise price of $2.00 per share.

The net proceeds of $761,000 were allocated based on the relative fair values of the common stock and the warrants on the dates of issuance. The amount allocated to the fair value of the warrants was $256,836 and the balance of the proceeds of $504,164 was allocated to the common stock. The fair value of the warrants issued was computed using the Black Scholes Option Pricing model using the following assumptions – expected life – 3 years, risk free interest rate – 0.34% to 0.65%, volatility – 91.4% to 150.3%, and an expected dividend rate of 0%.

From October 10 to December 31, 2013 we received gross proceeds of $650,000 from accredited investors at a price of $1.00 per unit and issued 650,000 shares of common stock and two-year warrants to purchase 650,000 shares of common stock at an exercise price of $1.25 per share.

The net proceeds of $650,000 were allocated based on the relative fair values of the common stock and the warrants on the dates of issuance. The amount allocated to the fair value of the warrants was $217,155 and the balance of the proceeds of $432,845 was allocated to the common stock. The fair value of the warrants issued was computed using the Black Scholes Option Pricing model using the following assumptions – expected life – 2 years, risk free interest rate – 0.28% to 0.38%, volatility – 81.5% to 113.0%, and an expected dividend rate of 0%.

2013 Issuances of common stock

During the year ended December 31, 2013 we issued 685,667 shares of common stock in our unit offerings described above and 368,162 shares of common stock upon the conversion of three of the convertible bridge loans as described in Note 6.

During the year ended December 31, 2013 we issued 48,842 shares of common stock with a fair value of $75,000 to SAM Advisors, LLC. The issuances were based on the closing market prices as of the date of issuance pursuant to our agreement to convert their $12,500 monthly consulting fee to stock at the closing market price on the last business day of each month. SAM Advisors, LLC is an entity controlled by William B. Smith, our chairman and chief executive officer. Effective July 1, 2013 Mr. Smith receives this amount in cash.

During the year ended December 31, 2013 we issued 6,143 shares of common stock with a fair value of $11,250 to Charles Hunt, a member of our board of directors. The issuances were based in the closing market prices as of the date of issuance pursuant to our agreement to convert $3,750 of his monthly consulting fee to stock at the closing market price on the last business day of each month.

F - 17

2012 Unit Offering

From January 24 to November 21, 2012 we sold 474,632 units at a subscription price of $3.50 per unit for gross proceeds of $1,661,199 in our unit private placement. Each unit consisted of one share of common stock and a three-year warrant to purchase one share of common stock at an exercise price of $3.75 per share. A total of 474,632 shares of common stock and warrants to purchase 474,632 shares of common stock at an exercise price of $3.75 were issued. Included in these amounts are 12,000 shares of our common stock and 12,000 warrants issued upon the conversion of $42,000 in accounts payable to a vendor and 55,267 shares of our common stock and 55,267 warrants issued upon the conversion of loans totaling $193,431 (including accrued interest and loan fees of $18,431). Also included in these amounts is cash investment of $105,000 and $15,000 received from two of our board members.

F - 17

The net proceeds of $1,425,768 were allocated based on the relative fair values of the common stock and the warrants on the dates of issuance. The allocated fair value of the warrants was $583,638 and the balance of the proceeds of $842,130 was allocated to the common stock.

The fair value of the shares issued to the vendor upon conversion of $42,000 of accounts payable was $70,920 based on the closing market price of our common stock on the date of conversion. The fair value of the warrant issued was $46,979. We recognized a loss on conversion of accounts payable based on the difference between the fair value of the common stock and warrants issued to the vendor in the amount of $75,599.

The fair value of the warrants issued in our unit private placement was calculated using the Black-Scholes option valuation model with the following assumptions:

Closing market price of common stock	~~$0.70 to $6.00~~	$	0.52		$	0.52
Estimated volatility	~~81.0% to 307.9%~~		92	%		92	%
Risk free interest rate	~~0.28% to 0.56%~~		3.36	%		3.36	%
Expected dividend rate	-		-			-
Expected life	~~3 years~~	10 years			10 years

On October 10, 2012 the board of directors reset the exercise price of the $3.75 per share warrants to purchase 474,632 warrants issued from $3.75 per share to $2.00 per share. All other terms and conditions of the warrants remain unchanged. Included in the total are 50,682 warrants owned by two members of our board of directors. As a result of this reduction in price, the original allocation of the net proceeds of $1,425,768 would have resulted in $629,619 being allocated to the warrants and the balance of the proceeds of $796,149 was allocated to the common stock.

On January 25, 2013 we amended the terms of the 2012 Unit Offering, reducing the purchase price of the unit to $1.00 and reducing the exercise price of the warrant to $1.50 per share. As a result of the amendment, the Company issued an additional 1,186,567 shares of common stock to those investors and increased the number of shares reserved for issuance upon the exercise of the warrants by 1,186,567. The issuance of the shares under the amendment was considered non-compensatory; therefore, there was no effect on the results of operations. The effect of the issuance was a reallocation of the original gross proceeds among additional paid-in capital accounts attributable to the shares and warrants, based on the relative fair values of the instruments delivered in total, including those issued under the amended terms. As a result of this reduction in price and change in the number of issued shares, the allocation of the net proceeds of $1,425,768 would have resulted in $587,989 being allocated to the warrants and the balance of the proceeds of $837,779 would have been allocated to the common stock.

2012 Issuances of common stock

On September 11, 2012 we issued 12,500 shares of common stock with a fair value of $30,625 based on the closing market price as of that date to a vendor for services. We recognized this as marketing expense in the accompanying statement of operations for the year ended December 31, 2012.

Effective July 24, 2012 we issued 59,000 shares of our restricted common stock valued at $142,780 based on the closing market price for our common stock of $2.42 per share pursuant to an agreement with a vendor for investor relations services. Effective August 31, 2012, we terminated the contract pursuant to its terms and cancelled the issuance of 52,858 shares. Accordingly, we recognized the fair value of the 6,142 shares of $14,864 as marketing expense in the accompanying statements of operations for the year ended December 31, 2012.

F - 18

From August 31, 2012 to December 31, 2012 we issued 56,208 shares of common stock with a fair value of $62,500 to SAM Advisors, LLC. The issuances were based in the closing market prices as of the date of issuance pursuant to our agreement to convert their $12,500 monthly consulting fee to stock at the closing market price on the last business day of each month. SAM Advisors, Inc. is an entity controlled by William B. Smith, our chairman and chief executive officer.

On December 20, 2012, we completed a private placement to accredited investors of 525,000 restricted shares of our common stock, at a purchase price of $0.80 per share, for gross proceeds of $420,000. As part of the private placement, the investors were issued three-year warrants to purchase 525,000 shares of our common stock, at an exercise price of $1.50 per share.

The net proceeds of $400,000 were allocated based on the relative fair values of the common stock and the warrants on the dates of issuance. The allocated fair value of the warrants was $127,787 and the balance of the proceeds of $272,213 was allocated to the common stock. The fair value of the warrants issued in our unit private placement was calculated using the Black-Scholes option valuation model with the following assumptions:

Closing market price of common stock	$ 0.70
Estimated volatility	101.20%
Risk free interest rate	0.39%
Expected dividend rate	-
Expected life	3 years

F - 18

In addition, on December 20, 2012, we entered into a settlement and release agreement with a vendor and issued 250,000 shares of our restricted common stock and three-year warrants to purchase 250,000 shares of our common stock at an exercise price of $1.50 per share, in settlement of $250,000 of trade accounts payable. The fair value of the shares issued was $175,000 based on the closing market price of our common stock on the date of conversion. The fair value of the warrant issued was $82,151. We recognized a loss on conversion of accounts payable based on the difference between the fair value of the common stock and warrants issued to the vendor in the amount of $7,151.

Closing market price of common stock	$0.70
Estimated volatility	101.20%
Risk free interest rate	0.39%
Expected dividend rate	-
Expected life	3 years

Also on December 20, 2012, we entered into a settlement and release agreement with another vendor and issued 64,256 shares of our restricted common stock in settlement of $64,256 of trade accounts payable. The fair value of the shares issued was $44,979 based on the closing market price of our common stock on the date of conversion. We recognized a gain on conversion of accounts payable based on the difference between the fair value of the common stock issued to the vendor in the amount of $19,277.

2011 Unit Offering

From January 12 to February 4, 2011, we sold 20,075 units at a subscription price of $20.00 per unit for net proceeds of $401,500 in our unit private placement. Each unit consisted of two shares of common stock and a two-year warrant to purchase one share of common stock at an exercise price of $20.00 per share. A total of 40,150 shares of common stock and warrants to purchase 20,075 shares of common stock at an exercise price of $20.00 were issued. Included in these amounts are 6,650 shares of our common stock and 3,325 warrants issued upon the conversion of $66,500 in accounts payable to R. Gale Sellers, our former Chief Executive Officer and board member.

The net proceeds were allocated based on the relative fair values of the common stock and the warrants on the dates of issuance. The allocated fair value of the warrants was $67,776 and the balance of the proceeds of $333,724 was allocated to the common stock.

The fair value of the warrants issued in our unit private placement was calculated using the Black-Scholes option valuation model with the following assumptions:

Closing market price of common stock	$~~10.00~~ ~~to $11~~0.2070
Estimated volatility	~~105~~101.520% ~~to 108.7%~~
Risk free interest rate	0.5439% ~~to 0.77%~~
Expected dividend rate	-
Expected life	23 years

~~2011~~Also ~~Private~~on ~~Placement~~December 20, 2012, we entered into a settlement and release agreement with another vendor and issued 64,256 shares of our restricted common stock in settlement of $64,256 of trade accounts payable. The fair value of the shares issued was $44,979 based on the closing market price of our common stock on the date of conversion. We recognized a gain on conversion of accounts payable based on the difference between the fair value of the common stock issued to the vendor in the amount of $19,277.

On February 8, 2011, we completed a private placement to eight institutional accredited investors of 245,560 shares of our common stock, at a purchase price of $9.00 per share, for gross proceeds of $2,210,000. As part of the private placement, the investors were issued five-year warrants to purchase 245,560 shares of our common stock, at an initial exercise price of $12.00 per share.

These warrants contain a full ratchet provision which reduces the exercise price of the warrant in the event we issue common stock or common stock equivalents at a price lower than the exercise price of the warrants. The exercise price cannot be reduced below $9.00 per share. As such, the warrants were treated as a derivative warrant liability as discussed in Note 10. The exercise price was reduced on June 22, 2011 to $11.00 per share as a result of the issuance of the convertible debentures as described in Note 7. On January 24, 2012, the exercise price of the warrants was further reduced to $9.00 per share in conjunction with the 2012 Unit Offering as described above. As a result of the price reductions, the warrants no longer qualify for derivative liability treatment.

F - 19

For each of the warrants, the holder will be able to exercise the warrant on a so-called cashless basis at any time following the one-year anniversary of the closing of the private placement in which a registration statement covering the shares of our common stock underlying such warrants is not effective.

The net proceeds from the private placement totaling $2,001,901, following the payment of offering-related expenses of $208,099, were used by us for our capital expenditure requirements and for working capital and other general corporate purposes. At the closing of the private placement, we paid Rodman & Renshaw LLC, the placement agent for the private placement, cash compensation of 7% of the gross proceeds of the private placement and a five-year warrant to purchase up to 17,190 shares of our common stock, at an initial exercise price of $12.00 per share.

We agreed, pursuant to the terms of a registration rights agreement with the investors, to file a shelf registration statement with respect to the resale of the shares of our common stock sold to the investors and shares of our common stock issuable upon exercise of the warrants with the SEC on or before April 10, 2011; and to use our best efforts to have the shelf registration statement declared effective by the SEC as soon as possible after the initial filing, and in any event no later than 90 days after the closing date (or 150 days in the event of a review of the shelf registration statement by the SEC). We also agreed to keep the shelf registration statement effective until all registrable securities may be sold under Rule 144 under the Securities Act of 1933 and if we are unable to comply with this covenant, we will be required to pay liquidated damages to the investors in the amount of 1.5% of the investors’ purchase price per month during such non-compliance (capped at a maximum of 10% of the purchase price), with such liquidated damages payable in cash. We filed the registration statement on April 10, 2011 and it was declared effective on April 18, 2011. We evaluated any liability under the registration rights agreement at December 31, 2012 and determined no accrual was necessary.

The investors agreed, pursuant to the securities purchase agreement, not to engage in any short sales (as defined in the agreement) until the earlier of the effective date of the shelf registration statement referred to above or the date when the shares of our common stock sold to the investors and shares of our common stock issuable upon exercise of the warrants are eligible for sale under Rule 144 under the Securities Act of 1933. We also granted the investors the right to participate in future equity financing transactions within the 12 months following the closing of the private placement and agreed to certain restrictions on our ability to sell our equity securities until 60 days after the effective date of the shelf registration statement.

Issuances of Common Stock

During the year ended December 31, 2011 we completed the following:

From January 12 to February 4, 2011, we sold 20,075 Units at a subscription price of $20.00 per Unit for net proceeds of $401,500 in our Unit Private Placement. Each Unit consists of two shares of common stock and a two-year warrant to purchase one share of common stock at an exercise price of $20.00 per share. A total of 40,150 shares of common stock and two-year warrants to purchase 20,075 shares of common stock at an exercise price of $20.00 were issued. Included in these amounts are 6,650 shares of our common stock and 3,325 warrants issued upon the conversion of accounts payable by R. Gale Sellers, our former Chief Executive Officer and a former member of our board of directors.

On June 22, 2011, we issued 15,000 shares of common stock with a fair value of $135,000 based on the closing market price as of that date of $9.00 per share to Milan Gottwald pursuant to the Sendio facilities purchase agreement as described in Note 6.

F - 20

Stock and Stock Options issued and exercised pursuant to the 2007 Stock Incentive Plan

On October 26, 2007, our Board of Directors approved our 2007 Stock Incentive Plan. A total of 500,000 shares of our common stock were authorized for issuance under the plan. The Stock Incentive Plan allows us to grant stock or stock option awards to our employees, directors, officers, consultants, agents, advisors and independent contractors of Vu1 and subsidiaries. We issue new shares when options are exercised. The Stock Incentive Plan is administered by our Board of Directors and Compensation Committee, which can determine the size and type of award granted, purchase price, vesting schedule and expiration date of any stock or options grant. All grants of shares and the shares underlying options are for restricted common stock and are issued at the closing market price of our common stock on the date of grant. On March 14, 2011, our board of directors increased the number of shares of our common stock that we are authorized to issue under the 2007 Stock Incentive Plan from 500,000 shares to 1,000,000 shares. A majority of our stockholders approved the amendment to the Stock Incentive Plan on October 10, 2011.

Stock issuances

A summary of activity related to grants of common stock under the 2007 Stock Incentive Plan as of December 31, ~~2012~~2013 is presented below.

	Number of Shares			Grant Date Fair Value
Outstanding, December 31, 2010		130,951		$	4.60 to $22.80
Granted		13,125		$	8.00
Forfeited		(12,683	)	$	10.20
Outstanding, December 31, 2011		131,393		$	4.60 to $22.80
Granted		168,500		$	3.26
Forfeited		(2,795	)	$	8.00
Outstanding, December 31, 2012		297,098		$	2.24 to $22.80
Vested, December 31, 2012		128,598		$	2.24 to $22.80

F - 19

A summary of the status of our nonvested stock grants as of December 31, 2012 and changes during the year ended December 31, 2012 is presented below.

	Number of Shares			Grant Date Fair Value
Outstanding, December 31, 2011		131,393		$	4.60 to $22.80
Granted		168,500		$	3.26
Forfeited		(2,795	)	$	8.00
Outstanding, December 31, 2012		297,098		$	2.24 to $22.80
Granted		399,231		$	1.20 to $1.61
Forfeited		-			-
Outstanding, December 31, 2013		696,329		$	1.20 to $22.80

Vested, December 31, 2013		524,070		$	1.20 to $22.80

Nonvested Stock Grants	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2011		7,529		$	8.00
Granted		168,500			3.26
Forfeited		(2,795	)		8.00
Vested		(4,734	)		9.20
Nonvested at December 31, 2012		168,500		$	3.26

A summary of the status of our nonvested stock grants as of December 31, 2013 and changes during the year ended December 31, 2013 is presented below.

Nonvested Stock Grants	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2012		168,500		$	8.00
Granted		399,231			1.29
Forfeited		-			-
Vested		(395,472	)		9.20
Nonvested at December 31, 2013		172,259		$	3.26

We made the following common stock awards for the year ended December 31, 2013 from the 2007 Stock Incentive Plan:

On February 20, 2013 we issued 80,000 shares of restricted stock from the 2007 Stock Incentive Plan to two board members and an officer for services vesting on the date of grant. The shares had a fair value of $128,800 based on the closing market price of our common stock on that date of $1.61 per share.

On June 15, 2013 we issued 19,231 shares of restricted common stock to a consultant for services vesting in equal monthly installments through the one year anniversary date of service. The shares had a fair value of $25,000 based on the closing market price of our common stock of $1.30 as of that date.

On August 26, 2013 we issued 300,000 shares of restricted common stock to our non-executive board members and an officer for services vesting ratably through June 1, 2014. The shares had a fair value of $360,000 based in the closing market price of $1.20 as of that date.

We recognized a total of $544,889 and $311,336 of compensation expense related to restricted stock issuances as general and administrative and research and development expenses for the years ended December 31, 2013 and 2012, respectively.

At December 31, 2013 there are 172,259 shares of unvested restricted stock representing $207,587 of unrecognized compensation expense which we anticipate will be recognized in the first half of 2014.

We made the following common stock awards for the year ended December 31, 2012 from the 2007 Stock Incentive Plan:

On June 1, 2012 we granted a total of 148,500 shares of restricted common stock to the six non-executive board members for service on the board of directors. The shares had a fair value of $504,900 based on the closing market price of $3.40 on the date of grant. The shares ~~vest~~vested on June 1, 2013.

OnF ~~August~~- ~~17, 2012 we granted~~ 20,000 shares of restricted common stock to an officer for service. The shares had a fair value of $44,800 based on the closing market price of $2.24 on the date of grant. The shares vest on August 17, 2013.

FOn -August 2117, 2012 we granted 20,000 shares of restricted common stock to an officer for service. The shares had a fair value of $44,800 based on the closing market price of $2.24 on the date of grant. The shares vested on August 17, 2013.

On July 28, 2011, Bill K. Hamlin, then a member of our board of directors, was appointed to the positions of President and Chief Operating Officer of Vu1. As part of his employment agreement, Mr. Hamlin agreed to convert $105,000 of his annual salary into 13,125 shares of our common stock at a conversion price of $8.00 per share, based on the closing market price of our common stock on the first day of his employment. These shares vested in twelve equal monthly installments over the term of his employment agreement. Mr. Hamlin resigned his position as President and Chief Operating Officer and director effective May 11, 2012. We recognized a total of $37,869 of compensation expense relative to the 4,734 shares of common stock that vested during the year ended December 31, 2012. ~~We recognized a total of $44,754 of compensation expense relative to the 5,592 shares that vested for the year ended December 31, 2011.~~ A total of 2,795 shares of unvested common stock were forfeited in 2012.

We made the following common stock awards for the year ended December 31, 2011 from the 2007 Stock Incentive Plan:

On March 17, 2011, we issued 5,000 shares of common stock from the 2007 Stock Incentive Plan with a fair value of $51,000 based on the closing market price as of that date of $10.20 per share pursuant to the settlement of a dispute with a former consultant and employee to the Company.

On June 15, 2011, we issued 12,500 shares of common stock with a fair value of $112,500 based on the closing market price as of that date of $9.00 per share for services to Integrated Sales Solutions, a company controlled by our President and Chief Operating Officer, Billy K. Hamlin.

Option issuances

A summary of activity related to stock options under the 2007 Stock Incentive Plan as of December 31, ~~2012~~2013 is presented below.

	Number of Shares			Exercise price range		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding, December 31, 2010		332,754		$	4.60 to $20.00	$	11.55		8.2	$	792,384
Granted		267,057		$	7.80 to $10.40	$	8.16
Exercised		-			-	$	-
Forfeited		(8,630	)	$	10.20	$	10.20
Outstanding, December 31, 2011		591,181		$	4.60 to $20.00	$	10.04		5.9	$	3,150
Granted		-			-	$	-
Exercised		-			-	$	-
Forfeited		(282,177	)	$	4.60 to $13.00	$	8.32
Outstanding, December 31, 2012		309,004		$	4.60 to $20.00	$	11.62		6.0	$	-
Exercisable, December 31, 2012		306,176		$	4.60 to $20.00	$	11.66		6.0	$	-
Granted		317,600		$	1.28 to $1.70	$	1.65
Exercised		-			-	$	-
Forfeited		(31,516	)	$	7.80 to $20.00	$	12.54
Outstanding, December 31, 2013		595,088		$	1.28 to $20.00	$	6.15		3.7	$	-
Exercisable, December 31, 2013		511,755		$	1.28 to $20.00	$	6.87		3.7	$	-

The aggregate intrinsic value of the stock options fluctuates in relation to the market price of our common stock as reflected on the OTC Bulletin Board.

FThe -range 22of exercise prices for options outstanding and options exercisable under the 2007 Stock Incentive Plan at December 31, 2013 are as follows:

The range of exercise prices for options outstanding and options exercisable under the 2007 Stock Incentive Plan at December 31, 2012 are as follows:

Range of Exercise Prices		Weighted Average Remaining Contractual Life of Options Outstanding (in years)		Options Outstanding				Options Exercisable
				Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
$	1.28 to $1.70		4.9		317,600	$	1.65		234,267	$	1.64
$	4.60		4.0		20,000	$	4.60		20,000	$	4.60
$	7.60 to $8.60		5.2		140,407	$	8.17		140,407	$	8.17
$	10.20 to $13.00		6.1		52,501	$	11.45		52,501	$	11.45
$	20.00		4.7		64,580	$	20.00		64,580	$	20.00

Range of Exercise Prices		Weighted Average Remaining Contractual Life of Options Outstanding (in years)		Options Outstanding				Options Exercisable
				Number of Shares		Weighted Average Exercise Price		Number of Shares		Weighted Average Exercise Price
$	4.60		5.0		20,000	$	4.60		20,000	$	4.60
$	7.60 to $8.60		6.2		145,407	$	8.16		142,579	$	8.17
$	10.20 to $13.00		7.1		67,501	$	11.71		67,501	$	11.71
$	20.00		5.1		76,096	$	20.00		76,096	$	20.00

F - 21

A summary of the status of our nonvested options as of December 31, ~~2012~~2013 and changes during the year ended December 31, ~~2012~~2013 is presented below.

Nonvested Options	Number of Shares Underlying Options			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2011		147,445		$	10.20
Granted		-			-
Forfeited or expired		(144,617	)		10.20
Vested		-			-
Nonvested at December 31, 2012		2,828		$	7.80
Granted		317,600			1.65
Forfeited or expired		(2,828	)		7.80
Vested		(234,267	)		1.65
Nonvested at December 31, 2013		83,333		$	1.70

We made the following stock option awards for the year ended December 31, 2013 from the 2007 Stock Incentive Plan:

On February 20, 2013 we issued ten-year, fully vested options to purchase 42,600 shares of common stock from the 2007 Stock Incentive Plan at an exercise price of $1.61 per share to two board members and an officer for services. The fair value of the options granted of $68,741 was calculated using the Black-Scholes option valuation model with the following assumptions – expected life – 10 years, risk free interest rate – 2.02%, volatility – 246.2%, and an expected dividend rate of 0%.

On March 11, 2013 we issued five-year options to purchase 250,000 shares of common stock at an exercise price of $1.70 per share to William B. Smith, our Chairman and Chief Executive Officer. A total of 83,334 options vested immediately, with an additional 83,333 shares vesting on the six month and twelve month anniversary of the options. In addition, certain performance based criteria provide for the potential acceleration of the vesting schedule. The fair value of the options granted of $410,540 was calculated using the Black-Scholes option valuation model with the following assumptions – expected life – 5 years, risk free interest rate – 0.9%, volatility – 188.8%, and an expected dividend rate of 0%.

On November 11, 2013 we issued five-year, fully vested options to purchase 25,000 shares of common stock at an exercise price of $1.28 per share to a consultant. The fair value of the options granted of $22,055 was calculated using the Black-Scholes option valuation model with the following assumptions – expected life – 5 years, risk free interest rate – 1.47%, volatility – 88.5%, and an expected dividend rate of 0%.

We recognized compensation expense of $478,228 and $132,416 related to the vested portion of stock options based on their estimated grant date fair value as marketing expense, research and development expense or general and administrative expense based on the specific recipient of the award for the years ended December 31, 2013 and 2012, respectively.

During the year ended December 31, 2013 options to purchase 30,266 shares of common stock at a weighted average exercise price of $14.32 expired unexercised.

There were no grants of stock options from the 2007 Stock Incentive Plan for the year ended December 31, 2012.

We ~~made~~recognized compensation expense of $544,577 and $445,685 related to the ~~following~~vested portion of stock ~~option~~and ~~awards~~stock options based on their estimated grant date fair value as research and development expense or general and administrative expense based on the specific recipient of the award for the ~~year~~years ended December 31, ~~2011~~2013 ~~from~~and ~~the~~2012, ~~2007 Stock Incentive Plan:~~respectively.

OnAt ~~March~~December 1431, ~~2011~~2013, ~~our~~there ~~board~~are ~~of directors issued ten-year options to purchase a total of 31~~319,~~250~~231 shares of ~~our~~unvested ~~common~~restricted stock atissued anin ~~exercise~~2013 ~~price~~ of ~~$10.40~~which ~~per~~we ~~share~~anticipate ~~based~~$207,587 onof ~~the~~unrecognized ~~closing~~compensation ~~market~~expense ~~price~~will asbe ofrecognized ~~that~~in ~~date~~2014. At toDecember ~~certain of~~31, ~~our~~2013, ~~directors~~we ~~and~~have anunrecognized ~~officer.~~compensation ~~The~~expense ~~fair~~related ~~value~~to ofstock ~~the~~ options ~~granted~~ of $~~285~~26,~~032~~824 ~~was~~which ~~calculated~~will ~~using~~be ~~the~~recognized ~~Black-Scholes~~in ~~option valuation model~~2014.

OnAs ~~April~~of ~~27,~~December ~~2011~~31, ~~we issued five-year options to purchase 110~~2013,~~807~~ ~~shares of our common stock at an exercise price of $7.82 per share based on~~ the ~~closing~~2007 ~~market~~Stock ~~price~~Incentive asPlan ofhas ~~that date to Scott C. Blackstone~~1, ~~Ph.D.~~223,299 ~~our~~shares ~~Chief~~available ~~Executive~~for ~~Officer,~~future ingrants ~~conjunction with his employment agreement as~~ of ~~that~~stock ~~date. The~~or options ~~vest monthly over three years from the date of issuance~~. ~~The fair value of the options granted of $616,084 was calculated using the Black-Scholes option valuation model. These options expired during 2012.~~

OnF July 28, 2011, we issued stock options to purchase up to 70,000 shares of our common stock at an exercise price of $8.00 per share, the closing market price on Bill K. Hamlin’s first day of employment, from the Stock Incentive Plan. A total of 30,000 options will vest over the term of his employment agreement, and the remaining 40,000 options will vest upon meeting certain performance criteria set by the Company. The fair value of the options granted of $244,580 was calculated using the Black-~~Scholes~~ ~~option valuation model. These options expired during 2012.~~22

On August 22, 2011, we issued stock options to purchase 50,000 shares of our common stock at an exercise price of $7.80 per share, the closing market price on the date of issuance, to certain directors and an officer from the Stock Incentive Plan. The options vest upon issuance. The fair value of the options granted of $246,500 was calculated using the Black-Scholes option valuation model. These options expired during 2012.

F - 23

On September 12, 2011, we issued stock options to purchase 5,000 shares of our common stock at an exercise price of $7.80 per share, the closing market price on the date of issuance, to an employee from the Stock Incentive Plan. The options vest ratably over five years. The fair value of the options granted of $23,190 was calculated using the Black-Scholes option valuation model.

We used the following assumptions in the calculations of the Black Scholes option valuation model to calculate the fair value of options issued during the years ended December 31, 2012 and 2011:

	Years ended December 31,
	2012	2011
Closing market price of common stock	-	$7.80 to $10.40
Estimated volatility	-	72.8% to 92.3%
Risk free interest rate	-	0.42% to 3.36%
Expected dividend rate	-	-
Expected life	-	2 - 10 years

We recognized compensation expense of $445,685 and $1,006,807 related to the vested portion of stock and stock options based on their estimated grant date fair value as research and development expense or general and administrative expense based on the specific recipient of the award for the years ended December 31, 2012 and 2011, respectively.

At December 31, 2012, there are 168,500 shares of unvested restricted stock issued in 2012 of which we anticipate $238,364 of unrecognized compensation expense will be recognized ratably through the vesting date of August 17, 2013. At December 31, 2012, we have unrecognized compensation expense related to stock options of $13,528, of which we anticipate $7,730 and $5,798 will be recognized in fiscal year 2013 and 2014, respectively.

As of December 31, 2012, the 2007 Stock Incentive Plan has 383,614 shares available for future grants of stock or options.

Warrant Issuances and Exercises

We issue new shares when warrants are exercised. There were no warrants exercised during the years ended December 31, ~~2012~~2013 and ~~2011~~2012.

2013 Warrants

As a result of the amendment of our 2012 Unit Offering as described above, the Company issued warrants to purchase an additional 1,186,567 shares of common stock at an exercise price of $1.50 per share to the investors in the offering.

On January 25, 2013 we issued three year warrants to purchase 105,000 shares of common stock at an exercise price of $1.50 per share in our unit offering described above.

From April 9 to July 11, 2013 we issued three year warrants to purchase 580,667 shares of common stock at an exercise price of $2.00 per share in our unit offering described above.

From October 10 to December 31, 2013 we issued two-year warrants to purchase 650,000 shares of common stock at an exercise price of $1.25 per share in our unit offering described above.

In February, 2013 we issued three year warrants to purchase 368,162 shares of our common stock at an exercise price of $1.50 per share and three year warrants to purchase 98,571 shares of our common stock at an exercise price of $11.00 per share to three investors upon the conversion of convertible bridge notes as described in Note 7.

During the year ended December 31, 2013 warrants to purchase a total of 230,858 shares of common stock with a weighted average exercise price of $15.31 expired unexercised.

2012 Warrants

During year ended December 31, 2012 we issued three year warrants at an exercise price of $3.75 per share to purchase 474,632 shares of common stock in our unit offering described above. On October 10, 2012 the board of directors reset the exercise price of the $3.75 per share warrants to purchase 474,632 warrants issued from $3.75 per share to $2.00 per share. All other terms and conditions of the warrants remain unchanged. Included in the total are 50,682 warrants owned by two members of our board of directors.

Also during the year ended December 31, 2012 we issued three year warrants at an exercise price of $11.00 per share to purchase 57,500 shares of common stock to three investors upon the conversion of a convertible bridge notes as described in Note 87.

On December 20, 2012, we issued three-year warrants to purchase 525,000 shares of our common stock at an exercise price of $1.50 per share in conjunction with a private placement as of that date as described above.

In addition, on December 20, 2012, we issued three-year warrants to purchase 250,000 shares of our common stock at an exercise price of $1.50 per share, in settlement of $250,000 of trade accounts payable as described above.

On January 24, 2012, the exercise price of the warrants to purchase 262,750 shares of common stock issued in conjunction with our February 9, 2011 private placement was reduced from $11.00 per share to $9.00 per share as a result of the issuance of the common stock and warrants in our unit private placement describe above.

During the year ended December 31, 2012 warrants to purchase a total of 214,975 shares of common stock with a weighted average exercise price of $15.55 expired unexercised.

F - 23

A summary of activity related to our warrants as of December 31, 2013 is presented below.

	Number of Shares			Exercise price range		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Outstanding, December 31, 2011		921,963		$	7.60 to $20.00	$	13.60		2.7
Granted		1,307,132		$	1.50 to $11.00	$	2.10
Exercised		-			-	$	-
Forfeited		(214,975	)	$	15.00 to $20.00	$	15.55
Outstanding, December 31, 2012		2,014,120		$	1.50 to $20.00	$	5.67		2.6
Granted		2,988,966		$	1.25 to $11.00	$	1.86		1.8
Exercised		-			-
Forfeited		(230,858	)	$	7.60 to $20.00	$	15.31
Outstanding, December 31, 2013		4,772,228		$	1.25 to $13.00	$	2.76		1.8

Exercisable, December 31, 2013		4,772,228		$	1.25 to $13.00	$	2.76		1.8

The following table summarizes our outstanding warrants as of December 31, 2013:

				Weighted-Average
Exercise		Warrants		Remaining Contractual		Number
Price		Outstanding		Life (Years)		Exercisable
$	1.25		650,000		1.9		650,000
$	1.50		2,909,360		1.6		2,909,360
$	2.00		580,667		2.5		580,667
$	9.00		262,750		2.1		262,750
$	11.00		156,071		1.9		156,071
$	13.00		213,380		2.5		213,380
			4,772,228		1.8		4,772,228

NOTE 11 - INCOME TAXES

The net deferred tax asset is comprised of the following:

	December 31,
	2013			2012
Net operating loss carryforwards	$	19,683,962		$	18,986,174
Share-based compensation		1,404,983			1,792,487
Valuation allowance		(21,088,945	)		(20,778,661	)
Deferred income tax asset	$	-		$	-

F - 24

~~2011~~The ~~Warrants~~provision for income taxes differs from the amount that would result from applying the federal statutory rate for the years ended December 31, 2013 and 2012 as follows:

On February 8, 2011, we issued five-year warrants to purchase 245,560 shares of our common stock, at an initial exercise price of $12.00 per share to investors in a private placement and a five-year warrant to purchase up to 17,190 shares of our common stock at an initial exercise price of $12.00 per share to the placement agent.

	For the Years Ended December 31,
	2013			2012

Net loss	$	5,019,977		$	3,825,448

Tax at federal statutory rate (34%)	$	(1,706,792	)	$	(1,300,652	)
Permanent differences		631,820			265,129
Expiration of options and warrants		764,688			-
Change in valuation allowance		310,284			1,035,523
Provision for Income Taxes	$	-		$	-

OnAs ~~June~~of 22December 31, ~~2011~~2013, ~~the~~we ~~exercise~~had ~~price~~net ofoperating ~~the~~loss ~~warrants~~carryforwards ~~was~~for ~~reduced from $12~~U.~~00 per share to $11~~S.00 ~~per~~federal ~~share~~income astax areporting ~~result~~purposes ofwhich ~~the~~if ~~issuance of the convertible debentures at a conversion price of $11.00 per share as described in Note 7. We also issued two-year warrants to purchase 20~~unused,~~075~~ ~~shares~~will ofexpire ~~common stock at an exercise price of $20.00~~ in ~~our~~the ~~unit~~following ~~offering, described above. In addition, we issued five-year warrants to purchase 213,380 shares of our common stock, at an exercise price of $13.00 per share as described above.~~years:

During the year ended December 31, 2011, warrants to purchase 6,988 shares of common stock with a weighted average exercise price of $13.43 per share expired unexercised.

	US
Year	Amount
2018	$	27,080,269
2019		1,745,867
2020		6,137,725
2021		5,251,175
2022		1,751,322
2023		78,281
2024		413,886
2025		508,429
2026		465,173
2027		760,272
2028		2,494,690
2029		2,121,595
2030		1,688,397
2031		2,433,302
2032		2,911,306
2033		2,052,317
	$	57,894,006

AThe ~~summary~~utilization of ~~activity~~U.S. ~~related~~net operating loss carryforwards may be limited due to ~~our~~the ~~warrants~~ownership aschange under the provisions of ~~December 31,~~Internal ~~2012~~Revenue isCode ~~presented~~Section ~~below~~382. The fiscal years 2010 to 2013 remain open to examination to U.S. Federal authorities and other jurisdictions in the U.S. where we operate.

	Number of Shares			Exercise price range		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Outstanding, December 31, 2010		432,746		$	7.60 to $20.00	$	15.18		2.1
Granted		496,205		$	11.00 to $20.00	$	12.22
Exercised		-			-	$	-
Forfeited		(6,988	)	$	12.00 to $20.00	$	13.43
Outstanding, December 31, 2011		921,963		$	7.60 to $20.00	$	13.60		2.7
Granted		1,305,046		$	1.50 to $11.00	$	2.10
Exercised		-			-	$	-
Forfeited		(214,975	)	$	15.00 to $20.00	$	15.55
Outstanding, December 31, 2012		2,012,034		$	1.50 to $20.00	$	5.67		2.6
Exercisable, December 31, 2012		2,012,034		$	1.50 to $20.00	$	5.67		2.6

The following table summarizes our outstanding warrants as of December 31, 2012:

				Weighted-Average
Exercise		Warrants		Remaining Contractual		Number
Price		Outstanding		Life (Years)		Exercisable
$	1.50		775,000		3.0		775,000
$	2.00		472,546		2.3		472,546
$	7.60		3,750		0.3		3,750
$	9.00		262,750		3.1		262,750
$	11.00		57,500		2.3		57,500
$	13.00		213,380		3.5		213,380
$	15.00		207,033		0.5		207,033
$	20.00		20,075		0.1		20,075
			2,012,034		2.6		2,012,034

F - 25

NOTE 12 - INCOME TAXES

The net deferred tax asset is comprised of the following:

	December 31,
	2012			2011
Net operating loss carryforwards	$	18,986,174		$	21,039,036
Share-based compensation		1,792,487			1,746,808
Fixed assets		-			63,382
Deposit on building		-			221,055
Other		-			17,716
Valuation allowance		(20,778,661	)		(23,087,997	)
Deferred income tax asset	$	-		$	-

Loss before income taxes is comprised of:

	For the Years Ended December 31,
	2012		2011
US Operations	$	3,825,448	$	2,784,347
Czech Republic Operations		-		6,297,275
	$	3,825,448	$	9,081,622

The provision for income taxes differs from the amount that would result from applying the federal statutory rate for the years ended December 31, 2012 and 2011 as follows:

	For the Years Ended December 31,
	2012			2011
Net loss	$	3,825,448		$	9,081,622
Tax at federal statutory rate (34%)	$	(1,300,652	)	$	(3,087,751	)
Effect of lower foreign tax rate		-			944,587
Permanent differences		265,129			(543,292	)
Loss of Sendio net operating losses		3,344,859			-
Change in valuation allowance		(2,309,336	)		2,686,456
Provision for Income Taxes	$	-		$	-

As of December 31, 2012, we had net operating loss carryforwards for U.S. federal income tax reporting purposes which if unused, will expire in the following years:

F - 26

	US
Year	Amount
2018	$	27,080,269
2019		1,745,867
2020		6,137,725
2021		5,251,175
2022		1,751,322
2023		78,281
2024		413,886
2025		508,429
2026		465,173
2027		760,272
2028		2,494,690
2029		2,121,595
2030		1,688,397
2031		2,433,302
2032		2,911,306
	$	55,841,689

The utilization of U.S. net operating loss carryforwards may be limited due to the ownership change under the provisions of Internal Revenue Code Section 382. The fiscal years 2009 to 2012 remain open to examination to U.S. Federal authorities and other jurisdictions in the U.S. where we operate.

NOTE 13 – SENDIO, SRO INSOLVENCY

On February 13, 2012, Sendio filed a petition of insolvency with the Regional Court in Olomouc, Czech Republic. In March, 2012 the court determined that Sendio was insolvent, and control of the legal entity passed to a court appointed trustee. The trustee is overseeing the orderly sale of the assets and using any proceeds to satisfy the liabilities of Sendio. As a result of the insolvency petition, we recognized an impairment of all of our long term assets as of December 31, 2011 comprised of equipment, construction in process and the deposit on building purchase as discussed in Note 2. Included in the balance sheets are the following ~~assets and~~ liabilities of Sendio that are subject to the insolvency proceedings:

	December 31,		~~December 31,~~
	2012		2011
	2013		2012
Current assets:
Cash	$	-	$	8,774
Tax refund receivable		-		57,089
Prepaid expenses and other receivables		-		10,657
		-		76,520
Current liabilities:
Accounts payable	$	189,089	$	~~273~~189,~~337~~089
Accrued payroll		357,052		~~373~~357,~~349~~052
Capital lease obligation, current portion		9,313		59,~~624~~313
Total current liabilities of Sendio		555,454		652,310
Total liabilities of Sendio		555,454		555,454
Non-current liabilities of Sendio:
Capital lease obligation, net of current portion		-		4,114
Total liabilities of Sendio	$	555,454	$	656,424

FOur -lease 27for the Sendio premises was terminated effective March 15, 2012 and our obligation to acquire the Sendio building was terminated on February 8, 2012.

Our lease obligation and the obligation to purchase the Sendio facility as discussed in Note 6 were terminated. Our lease for the premises was terminated effective March 15, 2012 and our obligation to acquire the building was terminated on February 8, 2012.

NOTE 14 – SUBSEQUENT EVENTS

As discussed in Note 11, during 2012, we issued a total of 474,632 shares of our restricted common stock and three-year warrants to purchase 474,632 shares of our common stock at an exercise price of $2.00 per share pursuant to a private placement to accredited investors at a price of $3.50 per unit. Each unit was comprised of one share of common stock and one warrant. On January 2528, ~~2013~~2014 we ~~amended~~entered ~~the~~into ~~terms of the private placement, reducing the purchase price of the unit to $1.00 and reducing the exercise price of the warrant to $1.50 per share. As~~ a ~~result~~lease ofagreement ~~the amendment, the Company issued an additional 1,186,567 shares of common stock to those investors and increased the number of shares reserved~~ for ~~issuance~~approximately ~~upon the exercise of the warrants by 1~~4,~~186,567.~~600 ~~The~~square ~~issuance~~feet of ~~the~~office ~~shares~~and ~~under~~light ~~the~~industrial ~~amendment~~space ~~was~~located ~~considered non-compensatory, therefore, there was no effect on the results of operations. The effect of the issuance was a reallocation of the original gross proceeds among additional paid-~~in ~~capital accounts attributable to the shares and warrants~~Berkeley, ~~based~~California ~~on the relative fair values of the instruments delivered~~ in ~~total, including those issued under~~ the ~~amended~~United ~~terms~~States. We Asutilize athe ~~result~~facility offor ~~this~~our ~~reduction~~research ~~in price~~ and ~~change~~development inactivities ~~the number of issued shares, the allocation of the net proceeds of $1,425,768 would have resulted in $587,989 being allocated to the warrants~~ and ~~the~~as ~~balance~~our ofcorporate ~~the proceeds of $837,779 would have been allocated to the common stock~~headquarters.

OnThe ~~January~~lease ~~25,~~term ~~2013~~is wefor ~~completed~~two ayears ~~private~~effective ~~placement~~from toFebruary ~~accredited investors of 105~~1,~~000~~ ~~restricted~~2014 ~~shares~~and ofterminates ~~our~~on ~~common~~January ~~stock~~31, at2016. aOur ~~purchase~~lease ~~price~~obligations ofare $~~1.00~~55,000, ~~per share~~$60,000 ~~for~~and ~~gross proceeds of~~ $~~105~~5,000~~. As~~ ~~part~~for of the ~~private~~years ~~placement,~~ended ~~the~~December ~~investors~~31, ~~were~~2014, ~~issued~~2015 ~~three-year~~and ~~warrants~~2016, torespectively. The ~~purchase~~Company ~~105,000~~is ~~shares~~also ofresponsible ~~our~~for ~~common~~certain ~~stock~~insurance, atutilities, anmaintenance ~~exercise~~and ~~price~~other ofcosts ~~$1.50~~as ~~per~~described ~~share~~in the lease.

OnThrough ~~February~~March 2027, ~~2013~~2014 we ~~issued~~received ~~ten-year,~~gross ~~fully~~proceeds ~~vested~~of ~~options to purchase 42~~$150,~~600~~000 ~~shares of common stock~~ from ~~the~~accredited ~~2007~~investors ~~Stock Incentive Plan~~ at ana ~~exercise~~ price of $1.6100 per ~~share~~unit ~~to two board members~~ and ~~an officer for services. In addition, we~~ issued 80150,000 shares of ~~restricted~~common stock ~~from~~and ~~the~~two-year ~~2007~~warrants ~~Stock~~to ~~Incentive~~purchase ~~Plan with a fair value of $128~~150,~~800~~000 ~~based~~shares ~~on the closing market price~~ of ~~our~~ common stock onat ~~that~~an ~~date~~exercise price of $1.6125 per share.

On February 2611, ~~2013~~2014 the three remaining holders of the convertible bridge loans as discussed in Note 8 converted the balance of an aggregate of $368,162 of their loans (including $68,162 of loan fees and accrued interest as of that date) into 368,162 shares of common stock at a conversion price of $1.00 per share. In addition, we issued ~~three-year~~stock ~~warrants~~options to purchase ~~368~~13,~~162~~158 shares of common stock to a consultant at an exercise price of $1.5014 per share ~~and~~based ~~three-year~~on ~~warrants~~the toclosing ~~purchase~~market ~~98,571~~price ~~shares~~ of our common stock atas ~~an exercise price~~ of ~~$11.00~~that ~~per share~~date.

From January 1 to February 28, 2013 we issued 13,925 shares of common stock with a fair value of $25,000 to SAM Advisors, LLC. The issuances were based in the closing market prices as of the date of issuance pursuant to our agreement to convert their $12,500 monthly consulting fee to stock at the closing market price on the last business day of each month. SAM Advisors, Inc. is an entity controlled by William B. Smith, our chairman and chief executive officer.F-26

From January 1 to February 28, 2013 we issued 3,988 shares of common stock with a fair value of $7,500 to Charles Hunt, a member of our board of directors. The issuances were based in the closing market prices as of the date of issuance pursuant to our agreement to convert $3,750 of his monthly consulting fee to stock at the closing market price on the last business day of each month.

F-28

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