| Nevada                                                              | 98-0168932                                |
|---------------------------------------------------------------------|-------------------------------------------|
| (State      or other jurisdiction of incorporation or organization) | (I.R.S.      Employer Identification No.) |

----

Braintech, Inc.

| PART      I   | FINANCIAL      INFORMATION                                                                            | 1      |
|---------------|-------------------------------------------------------------------------------------------------------|--------|
|          |                                                                                                  |   |
| Item      1.  | Financial      Statements                                                                             | 1      |
|          |                                                                                                  |   |
| Item      2.  | Management’s      Discussion and Analysis of Financial Condition and Results of      Operations | 2      |
|          |                                                                                                  |   |
| Item      3.  | Quantitative      and Qualitative Disclosures About Market Risk                                       | 9      |
|          |                                                                                                  |   |
| Item      4.  | Controls      and Procedures                                                                          | 9      |
|          |                                                                                                  |   |
| PART      II  | OTHER      INFORMATION                                                                                | 9      |
|          |                                                                                                  |   |
| Item      1.  | Legal      Proceedings                                                                                | 9      |
|          |                                                                                                  |   |
| Item      1A. | Risk      Factors                                                                                     | 10     |
|          |                                                                                                  |   |
| Item      2.  | Unregistered      Sales of Equity Securities and Use of Proceeds                                      | 15     |
|          |                                                                                                  |   |
| Item      3.  | Defaults      Upon Senior Securities                                                                  | 15     |
|          |                                                                                                  |   |
| Item      4.  | Submission      of Matters to a Vote of Security Holders                                              | 15     |
|          |                                                                                                  |   |
| Item      5.  | Other      Information                                                                                | 15     |
|          |                                                                                                  |   |
| Item      6.  | Exhibits                                                                                              | 17     |

----

| (i)   | Condensed      Consolidated Balance Sheets (unaudited) as of September 30, 2009 and      December 31, 2008; |
|-----------------|-------------------------------------------------------------------------------------------------------------|

| (ii)   | Condensed      Consolidated Statements of Operations (unaudited) for the three and nine      months ended September 30, 2009 and2008; |
|------------------|---------------------------------------------------------------------------------------------------------------------------------------|

| (iii)   | Condensed      Consolidated Statement of Stockholders’ Deficiency (unaudited) for the      nine months ended September 30,2009; |
|-------------------|---------------------------------------------------------------------------------------------------------------------------------------|

| (iv)   | Condensed      Consolidated Statements of Cash Flows (unaudited) for the nine months      ended September 30, 2009 and 2008;and |
|------------------|---------------------------------------------------------------------------------------------------------------------------------|

| (v)   | Notes      to Condensed Consolidated Financial Statements (unaudited) for the nine      months ended September 30, 2009 and2008. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------|

----

----

| BRAINTECH,      INC.                                |
|-----------------------------------------------------|
|                                                |
| Condensed      Consolidated Balance Sheets          |
| (Unaudited      – Prepared by Management)     |
| (Expressed      in United States dollars)           |
|                                                |
|                                                | September      30, 2009  | December      31, 2008  |
|                                                |   |   |
| Assets      (note    6)                             |   |   |
|                                                |   |   |
| Current      assets:                                |   |   |
|                                                | Cash      and cash equivalents | $ | 169,756  | $ | 2,446,538  |
|                                                | Restricted      cash (note 6) | 1,392,577  | -  |
|                                                | Accounts      receivable | 290,190  | 1,317,798  |
|                                                | Inventory | 4,242  | 13,705  |
|                                                | Prepaid      expenses | 27,208  | 23,556  |
|                                                | 1,883,973  | 3,801,597  |
|                                                |   |   |
| Intangible      assets and goodwill (note 3)        | -  | -  |
|                                                |   |   |
| Fixed      assets                                   | 52,045  | 50,743  |
|                                                |   |   |
|                                                | $ | 1,936,018  | $ | 3,852,340  |
|                                                |   |   |
| Liabilities      and Stockholders’ Deficiency |   |   |
|                                                |   |   |
| Current      liabilities:                           |   |   |
|                                                | Accounts      payable | $ | 1,096,809  | $ | 1,048,205  |
|                                                | Accrued      liabilities (note 10) | 1,651,985  | 1,184,583  |
|                                                | Deferred      revenue (note 4) | 1,212,110  | 1,260,510  |
|                                                | Due      to related party (note 5) | 139,914  | -  |
|                                                | Due      to letter of credit providers (note 6) | 1,391,253  | -  |
|                                                | Bank      loan (note 6) | 1,405,693  | 2,104,376  |
|                                                | 6,897,764  | 5,597,674  |
|                                                |   |   |
| Stockholders’      deficiency:                |   |   |
|                                                | Common      stock (note 7): |   |   |
|                                                |   | Authorized:      200,000,000 shares, with $0.001 par value |   |   |
|                                                |   | Issued:      69,606,104 shares | 69,606  | 56,502  |
|                                                |   | (December 31, 2008 –      56,502,245) |   |   |
|                                                | Additional      paid-in capital | 36,222,214  | 35,627,161  |
|                                                | Accumulated      deficit | (41,253,566) | (37,428,997) |
|                                                | (4,961,746) | (1,745,334) |
|                                                |   |   |
|                                                | $ | 1,936,018  | $ | 3,852,340  |

----

| BRAINTECH,      INC.                                 |
|------------------------------------------------------|
|                                                 |
| Condensed      Consolidated Statements of Operations |
| (Unaudited      – Prepared by Management)      |
| (Expressed      in United States dollars)            |
|                                                 |
|                                                 |   |   |
|                                                 | Nine      Months EndedSeptember      30, | Three      Months EndedSeptember      30, |
| 2009                                                 | 2008 | 2009 | 2008 |
|                                                 |   |   |   |   |
| Sales                                                |   | $ | 375,769  | $ | 3,581,679  |     $ | 281,680  |         $ | 1,375,309  |
| Cost      of sales                                   | 4,761  | 360,456  | (461) | 140,143  |
|                                                 |   |   |   |   |
| Gross      margin                                    | 371,008  | 3,221,223  | 282,141  | 1,235,166  |
|                                                 |   |   |   |   |
| Operating      expenses:                             |   |   |   |   |
|                                                 | Research      and development | 476,677  | 402,739  | 145,361  | 89,640  |
|                                                 | Selling,      general and administration | 3,621,411  | 3,797,523  | 822,583  | 829,670  |
|                                                 |   | 4,098,088  | 4,200,262  | 967,944  | 919,310  |
|                                                 |   |   |   |   |   |
| Operating      (loss)/income                         | (3,727,080) | (979,039) | (685,803) | 315,856  |
|                                                 |   |   |   |   |   |
| Non-operating:                                       |   |   |   |   |
|                                                 | Interest      income | 1,263  | 673  | 25  | 209  |
|                                                 | Loss      on disposition of fixed assets | (2,316) | (1,999) | -  | (1,999) |
|                                                 | Gain      on settlement of debt | -  | 25,750  | -  | -  |
|                                                 | Interest      and financing expenses |   |   |   |   |
|                                                 |   | Interest      on bank loan | (76,917) | (60,828) | (36,312) | (18,862) |
|                                                 |   | Fair      value of equity issued as |   |   |   |   |
|                                                 |   |   | compensation      to bank loan guarantors | -  | (2,440,705) | -  | (2,440,705) |
|                                                 |   | Other      financing expenses | (13,042) | (25,075) | (11,038) | (19,490) |
|                                                 |   | Bank      loan guarantee expenses | (6,477) | (18,469) | (2,938) | (12,514) |
|                                                 |   | (97,489) | (2,520,653) | (50,263) | (2,493,361) |
|                                                 |   |   |   |   |
| Net      loss and comprehensive loss for the period  | $ | (3,824,569) | $ | (3,499,692) | $ | (736,066) |         $ | (2,177,505) |
|                                                 |   |   |   |   |
| Loss      per share information:                     |   |   |   |   |
|                                                 | Basic      and diluted | $ | (0.07) | $ | (0.08) | $ | (0.01) |         $ | (0.05) |
|                                                 |   |   |   |   |   |
|                                                 |   |   |   |   |   |
| Weighted      average number of                      |   |   |   |   |
|                                                 | Common      shares outstanding | 55,296,017  | 46,053,031  | 55,618,547  | 47,146,302  |
|                                                 |   |   |   |   |   |

----

| BRAINTECH,      INC.                                                     |
|--------------------------------------------------------------------------|
|                                                                     |
| Condensed      Consolidated Statements of Stockholders’ Deficiency |
| (Unaudited      – Prepared by Management)                          |
| (Expressed      in United States dollars)                                |
|                                                                     |
|                                                                     |   |   |   |   |
|                                                                     | Common      stock |   |   | Total |
|                                                                     | Number |   | Additional | Accumulated | stockholders |
|                                                                     | of      shares | Amount | paid-in      capital | deficit | deficiency |
|                                                                     |   |   |   |   |   |
| Balance,      December 31, 2008                                          | 56,502,245  | $ | 56,502  | $ | 35,627,161  | $ | (37,428,997) | $ | (1,745,334) |
|                                                                     |   |   |   |   |   |
| Common      stock transactions                                           |   |   |   |   |   |
|                                                                     | (net      of share issue costs) |   |   |   |   |   |
|                                                                     | Shares      issued at $0.01 pursuant to |   |   |   |   |   |
|                                                                     |   | Bonus      Stock Plan | 14,750,000  | 14,750  | 132,750  | -  | 147,500  |
|                                                                     | Shares      purchased for cancellation |   |   |   |   |   |
|                                                                     |   | pursuant      to non-achievement |   |   |   |   |   |
|                                                                     |   | of      performance milestones | (4,750,000) | (4,750) | (42,750) | -  | (47,500) |
|                                                                     | Shares      issued for services rendered | 1,603,859  | 1,604  | 154,762  | -  | 156,366  |
|                                                                     | Shares      issued and held in escrow |   |   |   |   |   |
|                                                                     |   | as      security for payment | 1,500,000  | 1,500  | (1,500) | -  | -  |
|                                                                     | Release      from escrow of 100,000 shares |   |   |   |   |   |
|                                                                     |   | held      as security for payment |   |   | 10,000  | -  | 10,000  |
| Forgiveness      of promissory note for                                  |   |   |   |   |   |
|                                                                     | subscription      of common stock |   |   | 100,000  | -  | 100,000  |
| Fair      value of stock options expensed                                | - | - | 241,791  | -  | 241,791  |
| Loss      for the period                                                 | -  | -  | -  | (3,824,569) | (3,824,569) |
|                                                                     |   |   |   |   |   |   |   |   |   |
| Balance,      September 30, 2009                                         | 69,606,104  | $ | 69,606  | $ | 36,222,214  | $ | (41,253,566) | $ | (4,961,746) |

----

| BRAINTECH,      INC.                                                   |
|------------------------------------------------------------------------|
|                                                                   |
| Condensed      Consolidated Statements of Cash Flows                   |
| (Unaudited      – Prepared by Management)                        |
| (Expressed      in United States dollars)                              |
|                                                                   |
|                                                                   |
|                                                                   | Nine      months ended September 30, |
|                                                                   |   | 2009 |   | 2008 |
|                                                                   |   |   |   |   |
| Cash      flows from operations:                                       |   |   |   |   |
|                                                                   | Loss      for the period | $ | (3,824,569) | $ | (3,499,692) |
|                                                                   | Items      not involving cash: |   |   |   |   |
|                                                                   |   | Amortization |   | 26,212  |   | 22,533  |
|                                                                   |   | Loss      on disposition of fixed assets |   | 2,316  |   | 1,999  |
|                                                                   |   | Fair      value of warrants issued for services rendered |   | -  |   | 17,082  |
|                                                                   |   | Fair      value of shares issued for services rendered |   | 166,366  |   | -  |
|                                                                   |   | Fair      value of stock options expensed |   | 241,791  |   | 282,267  |
|                                                                   |   | Fair      value of warrants and common shares issued |   |   |   |   |
|                                                                   |   |   | as      compensation to loan guarantors |   | -  |   | 2,440,705  |
|                                                                   |   | Fair      value of shares earned pursuant to bonus stock plan |   | -  |   | 1,290,000  |
|                                                                   |   | Forgiveness      of promissory note for subscription of common stock |   | 100,000  |   | -  |
|                                                                   |   | Cancellation      of shares pursuant to non-achievement of milestone |   | (17,500) |   | -  |
|                                                                   | Changes      in non-cash operating working capital: |   |   |   |   |
|                                                                   |   | Accounts      receivable |   | 1,027,608  |   | (378,843) |
|                                                                   |   | Inventory |   | 9,463  |   | (11,124) |
|                                                                   |   | Prepaid      expenses |   | (3,652) |   | 30,886  |
|                                                                   |   | Accounts      payable and accrued liabilities |   | 516,006  |   | 200,257  |
|                                                                   |   | Due      to related party |   | 139,914  |   | (4,478) |
|                                                                   |   | Deferred      leasehold inducements |   | -  |   | (14,327) |
|                                                                   |   | Deferred      revenue |   | (48,400) |   | 480,072  |
|                                                                   | Net      cash (used in) provided by operations |   | (1,664,445) |   | 857,337  |
|                                                                   |   |   |   |   |   |   |
| Cash      flows from investments:                                      |   |   |   |   |
|                                                                   |   | Proceeds      of disposition of fixed assets |   | -  |   | 5,161  |
|                                                                   |   | Purchase      of fixed assets |   | (29,830) |   | (22,762) |
|                                                                   | Net      cash used in investments |   | (29,830) |   | (17,601) |
|                                                                   |   |   |   |   |   |
| Cash      flows from financing:                                        |   |   |   |   |
|                                                                   |   | Common      shares issued, net of issue costs |   | 147,500  |   | -  |
|                                                                   |   | Repurchase      of bonus stock |   | (30,000) |   | -  |
|                                                                   |   | Advances      from letter of credit providers |   | 1,391,253  |   | -  |
|                                                                   |   | Bank      Loan advance |   | -  |   | 1,207,163  |
|                                                                   |   | Repayment      of bank loan |   | (698,683) |   | (855,000) |
|                                                                   |   | Restricted      cash |   | (1,392,577) |   | -  |
|                                                                   | Net      cash (used in) provided by financing |   | (582,507) |   | 352,163  |
|                                                                   |   |   |   |   |   |
| (Decrease)/increase      in cash, cash equivalents and restricted cash |   | (2,276,782) |   | 1,191,899  |
|                                                                   |   |   |   |   |
| Cash      and cash equivalents, beginning of period                    |   | 2,446,538  |   | 921,367  |
|                                                                   |   |   |   |   |
| Cash      and cash equivalents, end of period                          | $ | 169,756  | $ | 2,113,266  |
|                                                                   |   |   |   |   |
| Supplemental      information:                                         |   |   |   |   |
|                                                                   | Non-cash      financing: |   |   |   |   |
|                                                                   |   | Warrants      issued for services rendered | $ | -  |   | 17,082  |
|                                                                   |   | Shares      issued for financing services and financing expenses | $ | 1,248  |   | -  |
|                                                                   |   | Shares      issued for debt | $ | -  |   | 122,080  |
|                                                                   |   | Shares      and warrants issued to bank loan guarantors | $ | -  |   | 2,440,705  |
|                                                                   |   | Shares      issued for Shafi Inc. acquisition | $ | -  |   | 990,000  |
|                                                                   |   | Shares      issued for compensation | $ | 156,366  |   | -  |
|                                                                   |   | Forgiveness      of promissory note for subscription of common stock | $ | 100,000  |   | -  |
|                                                                   |   | Release      from escrow of shares held for security |   | 10,000  |   | -  |
|                                                                   |   | Cancellation      of shares pursuant to non-achievement of milestone | $ | (17,500) |   | -  |
|                                                                   | Cash      interest paid | $ | 43,269  | $ | 60,828  |

----

----

----

----

| (b)   | Principles      of consolidation: |
|-----------------|-----------------------------------|

| (c)   | Use      of estimates: |
|-----------------|------------------------|

| (d)   | Stock      based compensation: |
|-----------------|--------------------------------|

----

----

| (e)   | Loss      per share: |
|-----------------|----------------------|

| (f)   | Revenue      recognition: |
|-----------------|---------------------------|

| (g)   | Business      combinations and intangible assets including  goodwill: |
|-----------------|-----------------------------------------------------------------------|

----

----

| §  | The      delivered items have value to the customer on a standalone basis;      and |
|--------------|-------------------------------------------------------------------------------------|

| §  | If      the arrangement includes a general right of return relative to the      delivered items, delivery or performance of the undelivered items is      considered probable and substantially in the control of the      vendor. |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·          | VSOE      (Vendor-Specific Objective Evidence) of the selling  price; |
|--------------------------------|-----------------------------------------------------------------------|

| ·          | Third-party      evidence (TPE) of the selling price – prices of the vendor’s or any      competitor’s largely interchangeable products or services, in standalone      sales to similarly situated customers;and |
|--------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·          | Best      estimate of the selling price. |
|--------------------------------|------------------------------------------|

----

----

----

----

| Intangible      assets of Shafi Inc.                        | $      | 1,090,000  |
|-------------------------------------------------------------|--------|-----------------|
| Goodwill      of Shafi Inc.                                 |   | 900,000    |
| Due      to Braintech, Inc.                                 |   | (100,000)       |
| Current      liabilities of Shafi Inc.                      |   | (900,000)       |
|                                                        |   |            |
| Net      assets acquired of Shafi Inc.                      | $      | 990,000    |
| Consideration:      3,000,000 shares of common stock issued | $      | 990,000    |

----

----

|                                                          | Nine      Months Ended September 30, |
|---------------------------------------------------------------|--------------------------------------|
|                                                          |                                 | 2009 |   | 2008 |
| Balance,      beginning of period                             | $                                    | 1,260,510  | $ | 622,971  |
| Revenue      invoiced and deferred for future recognition     |                                 | 8,051  |   | 572,092  |
| Previously      deferred revenue recognized in current period |                                 | (56,451) |   | (82,020) |
| Balance,      end of period                                   | $                                    | 1,212,110  | $ | 1,103,043  |

----

----

----

----

----

----

----

----

| (b)   | Bonus      stock and bonus stock option incentiveplan: |
|-----------------|--------------------------------------------------------|

----

----

|                         | Nine      Months Ended  |
|------------------------------|-------------------------|
|                         | September      30, 2009 | September      30, 2008 |
| Expected      life (years)   | 2.33                    | 2.00 |
| Risk      free interest rate | 1.02%                   | 2.06% |
| Expected      volatility     | 247%                    | 188% |
| Dividend      yield          | 0%                      | 0% |
| Expected      forfeitures    | 0%                      | 0% |

|                             |             | Weighted            |
|----------------------------------|------------------|---------------------|
|                             | Number           | average             |
|                             | of      options  | exercise      price |
|                             |             |                |
| Balance,      December 31, 2008  | 14,267,000  | $0.40          |
| Options      granted             | 1,140,000   | 0.11           |
| Options      exercised           | -           | -              |
| Vested      options expired      | (3,160,000)      | 0.46           |
| Unvested      options forfeited  | (250,000)        | 0.13           |
|                             |             |                |
| Balance,      September 30, 2009 | 11,997,000  | $0.36          |

----

----

| A      summary of the Company’s share purchase warrant activity is as      follows: |
|-------------------------------------------------------------------------------------------|
|                                                                                      |
|                                                                                      |   Numberof      warrants |  Weightedaverageexercise      price | Weightedaverage      remainingcontractual      life(years) |
|                                                                                      |   |   |   |   |
| Balance,      December 31, 2008                                                           | 35,521,179  | $   0.33 | 3.56 |
|                                                                                      | Warrants      granted | -  | -  | -  |
|                                                                                      | Warrants      expired | (2,281,227) | 0.43 | -  |
|                                                                                      | Warrants      exercised | -  | -  | -  |
|                                                                                      | Warrants      cancelled (note 7) | (100,000) | 0.30 | -  |
|                                                                                      |   |   |   |   |
| Balance,      September 30, 2009                                                          | 33,139,952  | $   0.32 | 2.51 |

| Year      ending December 31: |    |
|-------------------------------|---------|
| 2009                          | 44,508  |
| 2010                          | 142,539 |
| 2011                          | 83,495  |
| 2012                          | 62,903  |
| 2013                          | 54,925  |
| 2014                          | 33,687  |
|                          | $       | 422,057 |

----

----

----

| Sales  | Three      Months Ended |   |              |
|--------|-------------------------|--------|-------------------|
|   | September      30       |   | September      30 |   | % |
|   | 2009                    |   | 2008              |   | Change |
|   |                    |   |              |   |   |
|   | $281,680                |   | $1,375,309        |   | (79.5%) |

----

| Research      and Development Expenses | Three      Months Ended |   |              |
|----------------------------------------|-------------------------|--------|-------------------|
|                                   | September      30       |   | September      30 |   | % |
|                                   | 2009                    |   | 2008              |   | Change |
|                                   |                    |   |              |   |   |
|                                   | $145,361                |   | $89,640           |   | 62.2% |

| Selling,      General and Administrative Expenses | Three      Months Ended |   |              |
|---------------------------------------------------|-------------------------|--------|-------------------|
|                                              | September      30       |   | September      30 |   | % |
|                                              | 2009                    |   | 2008              |   | Change |
|                                              |                    |   |              |   |   |
|                                              | $822,583                |   | $829,670          |   | (0.8)% |

| Interest      and Financing Expenses | Three      Months Ended |   |              |
|--------------------------------------|-------------------------|--------|-------------------|
|                                 | September      30       |   | September      30 |   | % |
|                                 | 2009                    |   | 2008              |   | Change |
|                                 |                    |   |              |   |   |
|                                 | $50,263                 |   | $2,493,361        |   | (98.0)% |

----

| Sales  | Nine      Months Ended |   |              |
|--------|------------------------|--------|-------------------|
|   | September      30      |   | September      30 |   | % |
|   | 2009                   |   | 2008              |   | Change |
|   |                   |   |              |   |   |
|   | $375,769               |   | $3,581,679        |   | (89.5%) |

| Research      and Development Expenses | Nine      Months Ended |   |              |
|----------------------------------------|------------------------|--------|-------------------|
|                                   | September      30      |   | September      30 |   | % |
|                                   | 2009                   |   | 2008              |   | Change |
|                                   |                   |   |              |   |   |
|                                   | $476,677               |   | $402,739          |   | 18.4% |

| Selling,      General and Administrative Expenses | Nine      Months Ended |   |              |
|---------------------------------------------------|------------------------|--------|-------------------|
|                                              | September      30      |   | September      30 |   | % |
|                                              | 2009                   |   | 2008              |   | Change |
|                                              |                   |   |              |   |   |
|                                              | $3,621,411             |   | $3,797,523        |   | (4.6%) |

----

| Interest      and Financing Expenses | Nine      Months Ended |   |              |
|--------------------------------------|------------------------|--------|-------------------|
|                                 | September      30      |   | September      30 |   | % |
|                                 | 2009                   |   | 2008              |   | Change |
|                                 |                   |   |              |   |   |
|                                 | $97,489                |   | $2,520,653        |   | (96.1%) |

----

|                                 | Three      Month Period ended |                    |
|--------------------------------------|-------------------------------|-------------------------|
| Expense      Category                | June      30, 2009            | September      30, 2009 | Cost      Reduction |
|                                 |                          |                    |   |
| Wages      & Benefits            | $562,418                      | $355,782                | $206,636  |
| Consulting      & Contract Labor | 450,096                       | 232,720                 | 217,376  |
| Stock      Option Expense            | 78,048                        | 58,895                  | 19,153  |
| Professional      Services           | 223,451                       | 130,292                 | 93,159  |
| Trade      Show & Marketing      | 61,903                        | 25,225                  | 36,678  |
| Office      & Miscellaneous      | 149,349                       | 165,029                 | (15,680) |
| Lease      Termination Expense       | 420,000                       | -                  | 420,000  |
|                                 |                          |                    |   |
| Total                                | 1,945,265                     | 967,943                 | 977,322  |

----

| §   | The      delivered items have value to the customer on a standalone basis;      and |
|--------------------|-------------------------------------------------------------------------------------|

| §   | If      the arrangement includes a general right of return relative to the      delivered items, delivery or performance of the undelivered items is      considered probable and substantially in the control of the      vendor. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | VSOE      (Vendor-Specific Objective Evidence) of the selling  price; |
|--------------------|-----------------------------------------------------------------------|

| ·   | Third-party      evidence (TPE) of the selling price – prices of the vendor’s or any      competitor’s largely interchangeable products or services, in standalone      sales to similarly situated customers;and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Best      estimate of the selling price. |
|--------------------|------------------------------------------|

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| ·   | issue      additional equity securities that would dilute the ownership of our      stockholders; |
|--------------------|---------------------------------------------------------------------------------------------------|

| ·   | use      cash that we may need in the future to operate our    business; |
|--------------------|--------------------------------------------------------------------------|

| ·   | incur      or assume debt on terms unfavorable to us or that we are unable to      repay; |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | incur      large charges or substantialliabilities; |
|--------------------|-----------------------------------------------------|

| ·   | encounter      difficulties retaining key employees of an acquired company or integrating      diverse business cultures; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------|

| ·   | become      involved in legal disputes; and |
|--------------------|---------------------------------------------|

| ·   | become      subject to adverse tax consequences, substantial depreciation or deferred      compensation charges. |
|--------------------|------------------------------------------------------------------------------------------------------------------|

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| PLEDGOR             | DESCRIPTION                                 | BACK-STOP      SECURITY AMOUNT | SHARES      TO BE RECEIVED | AMOUNT      OF NOTE |
|---------------------|---------------------------------------------|--------------------------------|----------------------------|---------------------|
| Rick      Weidinger | CEO,      Director,Largest      Shareholder | $750,000                       | 15,000,000                 | $1,125,000          |
| Kenneth      Brooks | Shareholder                                 | $350,000                       | 7,000,000                  | $525,000            |
| David      Baird    | Shareholder                                 | $250,000                       | 5,000,000                  | $375,000            |
| Fred      Bohlander | Shareholder                                 | $100,000                       | 2,000,000                  | $150,000            |
| Colin      Eagen    | Shareholder                                 | $100,000                       | 2,000,000                  | $150,000            |

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|   |                                                                                                                                                                                    |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.1*  | Loan      and Security Agreement (Term Loan) dated as of October 30, 2009 between      the Company and Silicon Valley Bank                                                              |
|   |                                                                                                                                                                                    |
| 10.2*  | Loan      and Security Agreement (Accounts Receivable Line of Credit) dated as of      October 30, 2009 between the Company and Silicon Valley    Bank                                  |
|   |                                                                                                                                                                                    |
| 10.3*  | Non-Recourse      Letter of Credit Agreement dated as of October 30, 2009 by Rick Weidinger      in favor of Silicon Valley Bank                                                        |
|   |                                                                                                                                                                                    |
| 10.4*  | Non-Recourse      Pledged Account Agreement dated as of October 30, 2009, by Kenneth Brooks,      David Baird, Frederick Bohlander and Colin Eagen in favor of Silicon      Valley Bank |
|   |                                                                                                                                                                                    |
| 10.5*  | Subordination      Agreement dated as of October 30, 2009 between Rick Weidinger, Kenneth      Brooks, David Baird, Frederick Bohlander and Colin Eagen and Silicon      Valley Bank    |
|   |                                                                                                                                                                                    |
| 10.6*  | Subordination      Letter of James Speros dated as of October 30, 2009 in favor of Silicon      Valley Bank                                                                             |
|   |                                                                                                                                                                                    |
| 10.7*  | Stock      Purchase Agreement dated as of October 29, 2009 between the Company and      Owen Jones                                                                                      |
|   |                                                                                                                                                                                    |
| 10.8*  | Employment      Agreement dated as of October 22, 2009 between the Company and Edward A.      White                                                                                     |
|   |                                                                                                                                                                                    |
| 10.9*  | Promissory      Note ($90,300 Cash Bonus plus interest) issued September 21, 2009 by the      Company to Rick Weidinger                                                                 |
|   |                                                                                                                                                                                    |
| 10.10* | Promissory      Note (Deferred Salary plus interest) issued September 21, 2009 by the      Company to Rick Weidinger                                                                    |
|   |                                                                                                                                                                                    |
| 10.11* | Promissory      Note ($30,000 Stock Repurchase plus interest) issued September 25, 2009 by      the Company to Rick Weidinger                                                           |
|   |                                                                                                                                                                                    |
| 31.1*  | Certificate      of the Principal Executive Officer pursuant to Sec 302 of the      Sarbanes-Oxley Act of 2002                                                                          |
|   |                                                                                                                                                                                    |
| 31.2*  | Certificate      of Principal Financial and Accounting Officer pursuant to Sec 302 of the      Sarbanes-Oxley Act of 2002                                                               |
|   |                                                                                                                                                                                    |
| 32.1*  | Certificate      of Principal Executive Officer pursuant to Sec 906 of the Sarbanes-Oxley      Act of 2002                                                                              |
|   |                                                                                                                                                                                    |
| 32.2*  | Certificate      of Principal Financial and Accounting Officer pursuant to Sec 906 of the      Sarbanes-Oxley Act of 2002                                                               |

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|      |                                                                                              |   |                                    |
|-----------|---------------------------------------------------------------------------------------------------|--------|-----------------------------------------|
|  By: | /s/      Frederick W. Weidinger                                                                   |   | Date:  November      16, 2009 |
|      | Frederick      W. Weidinger                                                                       |   |                                    |
|      | Chief      Executive Officer(Principal      Executive Officer)                                    |   |                                    |
|      |                                                                                              |   |
|      |                                                                                              |   |                                    |
|  By: | /s/ Edward A. White              |   | Date:      November 16, 2009            |
|      | Edward      A. White                                                                              |   |                                    |
|      | Treasurer,(Principal      Financial andAccounting      Officer)                                   |   |                                    |

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